March 1, 2021 I Economics

. . The monthly SME roundup provides an update on the capital market movement in the broad SME indices, upcoming IPOs in the SME space and key developments in the sector. The report also takes a closer look at the credit growth in the MSMEs.

Capital market movement Table 1: Capital Market Movement Index 29-Jan-21 26-Feb-21 % change Nifty SME Emerge Index 1,723 1,792 4.0 BSE SME IPO Index 1,474 1,761 19.5 BSE Sensex 46,286 49,100 6.1 Nifty 50 13,635 14,529 6.6 Source: NSE Emerge, BSE SME Platform

• BSE SME IPO index has outperformed Nifty SME Emerge Index ad both BSE Sensex and Nifty 50 index in February 2021 compared with January 2021. • Nifty SME emerge index closed 4% higher at month-end February 2021 while BSE SME IPO index close 19.5% higher by the month-end.

Active IPOs Company Name Start Date End Date Offer Price (Rs.) Face Value Platform Pavna Industries Limited 24-Feb-21 01-Mar-21 165 10 NSE Party Cruisers Limited 22-Feb-21 25-Feb-21 51 10 NSE

Sectoral Deployment of Credit: MSMEs • As of January 2021, the outstanding bank credit to MSME sector amounted to Rs. 12.8 lakh crore comprising nearly 13.5% of the total gross bank credit as of January 2021. • Out of this, the services sector accounted for nearly 61% of the total bank credit disbursed to MSME sector and has been driving the overall MSME credit. The growth in the bank credit towards micro & small enterprises – services have recorded a growth of 11.5% during April-January 2021 (YOY). • The incremental bank credit (April-January 2021) to the medium enterprises stood at Rs 1.3 lakh crs, 20.5% higher than the corresponding period last year. • The incremental bank credit (April-January 2021) to the micro & small enterprises – manufacturing, which account for almost 30% of the total bank credit to the MSMEs stood at Rs 3.77 lakh crs, 2.5% lower than corresponding period last year.

Table 2: Bank credit to SME Sector Outstanding as on % Growth Sector Mar.29, Mar.27, Jan 30, 2020 / Jan 29,2021 / Jan 18,2019 Jan 30,2020 Jan 29,2021 2019 2020 Mar.29, 2019 Mar.27 2020 Micro & Small Enterprises 10,17,306 10,46,690 10,79,522 10,78,702 11,48,502 3.1 6.5 Manufacturing 3,71,023 3,75,508 3,73,050 3,85,834 3,76,297 -0.7 -2.5 Services 6,46,283 6,91,670 7,06,472 6,92,868 7,72,206 2.1 11.5 Medium Enterprises 1,03,949 1,06,395 1,06,813 1,05,598 1,27,227 0.4 20.5 Source: Reserve Bank of India

Key developments • Budget announcements for MSMEs o The budget allocation in the MSME sector is Rs 15,700 crs in FY22(BE) which is almost triple than that of the revised estimates of FY21 (Rs 5,664 crs) o Changes in customs duty on MSME products – ▪ The customs duty on steel screws and plastic builder wares have been increased from 10% to 15% and prawn feed from 5% to 15%

▪ Withdrawal of exemption on imports of certain kind of leathers ▪ Raising customs duty on finished synthetic gem stones ▪ Reduction of customs duty uniformly to 7.5% on semis, flat and long products of non-alloy, alloy and stainless steels. ▪ Exemption of duty on steel scrap for a period up to March 31, 2022 • Target for banks to lend around Rs 80,000 crs to MSMEs in Uttar Pradesh: The Chief Minister of Uttar Pradesh has set a target of Rs 80,000 crs loans to the MSME sector in the next financial year (FY22). Around 20 lakhs MSMEs are likely to benefit and this will help in employment generation of more than 1 crore

• Technology Centre for MSMEs in Puducherry The Ministry of MSMEs is establishing a world class technology centre in Puducherry to promote, aid and foster growth of local MSMEs and start-ups.

• Products manufactured by MSMEs in Haryana to get global markets Haryana’s Micro, Small and Medium Enterprises Department has signed an MOU with three e-commerce companies so that the goods produced by these MSMEs will now be available for exports at a reasonable price. This gives a boost to the MSMEs of the state as well as talented artisans.

• MSMEs in Maharashtra and Tamil Nadu lead in registration on the Udyam Portal There has been a surge in the number of MSME registrations between July 1, 2020 and February 8, 2021 with has as many as 21 lakhs MSME units being registered on the new portal of UDYAM. The registrations in Maharashtra has been 4.96 lakhs followed by Tamil Nadu at 2.32 lakhs. These two states have seen the highest registrations in the last five and half years.

• Credit to MSMEs exempted in calculation of CRR: Schedule Commercial banks will be allowed to deduct credit disbursed to “new MSME borrowers (who have not availed credit facilities from the banks as on January 1, 2021)” from their NDTL for the calculation of CRR. This exemption will be available for exposures upto Rs 25 lakhs per borrower for credit extended till October 1, 2021.

CARE Ratings’ presence in SME activities

Aakash Jain, Associate Director conducted an interactive session with Canara Bank(Risk & Credit team), Head office, Bangalore dated 17th Feb, 2021. Mr. Naga Bhushan, DGM, Mr. Yadav, Astt General manager, Canara Bank along with his team were part of the discussion. Discussion on various offerings from CARE Ratings were part of the discussion. CRSPL team has also done the session for Canara Bank jointly & proposed few risk solutions to the bank. Pune business development team were also part of the session.

CARE PRO has done knowledge session for Ernst & Young on NBFC Sector dated 23rd Feb, 2021. It was arranged by Mr. Aakash Jain, Associate Director and presentation was done by Mr. Mitul Budhabati, DGM. The session was attended by Ms. Ranjana Nishi from business development team.

Knowledge session for HDFC Bank, Corporate Banking Team(Rest of Maharashtra & Goa) was done by CARE Pune team on Auto sector dated 20th feb, 2021. Presentation was moderated and arranged by Aakash Jain, Associate Director. Presentation was done by Divyesh Shah, Amita Yadav, Sourab Kadadi and Rahul Gaikwad. Other team members from business development and analytical team were also present.

Contact: Madan Sabnavis Author: Mradul Mishra Chief Economist Sushant Hede (Media Contact) [email protected] Associate Economist [email protected] +91-22-6837 4433 [email protected] +91-22-6754 3573 +91-22-6837 43348

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