Hyderabad, Oct 26 (KNN) According to a latest study entrepreneurs in Telangana have started to borrow from informal sources in order to cope with the delayed payments and keep their business running.

Telangana Industrial Health Clinic Ltd., (TIHCL) and Centre for Economic and Social Studies (CESS) recently released a report on ‘A Study of Health of MSEs in Telangana’ which analyses the industrial health of manufacturing sector in the state.

The report reveals that in all cases where the turnover crossed Rs 100 lakh, the delays ranged from 60 to 120 days. Enterprises with low turnover used to manage through rotation of debt for periods ranging from 15 to 30 days.

“About 38 per cent of them resorted to borrowings from the informal sources and about 18 per cent from the formal sources. The entrepreneurs have adopted various coping strategies to deal with delays in payments for running the business,” said the report.

The study has further investigated the job loss due to shortage of working capital due to delayed payments and increased prices of raw materials. The total shortage of working capital faced by 10 these enterprises is estimated at Rs 130.08 crore.

The entrepreneurs reported that they would have employed 1,533 additional workers had they got additional working capital.

Banks were reported to be unhelpful in meeting the working capital requirements in 32 percent of the enterprises and even where they provided, it was fraught with delays. This factor also led to underselling their products (less than the cost of production as the cost of storage is felt higher than disposing at the lower price).

The report has found that the resilient factor tends to reduce as the age of entrepreneurs increases (from 90 per cent to 58.3 per cent for age above 60 years).

“However, in the case of the age group of 35 to 45 years, 45 to 60 years, and above 60 years, entrepreneurs having post-graduation level of education tend to improve better than otherwise,” says the report.

In view of turnover, 6.1% MSEs have an annual turnover of less than Rs 10 lakhs; 23.3% have a turnover of Rs 10-50 lakh; 39.5% have a turnover of Rs 100-500 lakh and 5.5% of enterprises have an annual turnover of Rs.500-1000 lakhs.

The study further reports that on average, per enterprise full-time employment is 14 persons and within the manufacturing sector, electrical sector has provided largest employment (27 workers) followed by Pharma (24 workers), Printing (17 workers), Textile and Solar (15 to 16 workers).

“During 2019, only about 29 per cent of enterprises managed to utilize 95 to 100 per cent of installed production capacity. The situation became worse during 2020 due to adverse effects of the pandemic. About 59 per cent of enterprises utilized installed production capacity at and below 50 per cent. During 2021, there was a strong recovery reported wherein about 27 per cent of enterprises reported utilization to the tune of 95 to 100 per cent of installed production capacity,” says the report.

Although during 2022, the capacity utilization is higher than the crisis period of 2020, it is still extremely low as only about 27 per cent of enterprises utilize 95 to 100 per cent of installed capacity.

As per the study the major reasons for under-utilization in the year 2022 are the pandemic effect (24.8 per cent), lack of demand (24.1 per cent), increased cost of raw material (116.7 per cent), and lack of finance (9.9 per cent).

To gauge the recovery from the adverse shock caused by the pandemic, the study has considered average turnover for three pre-pandemic years (2017 to 2019) and compared it with pandemic and post-pandemic years (2020 to 2022).

During 2020, which is in the middle of the pandemic, the turnover of enterprises declined. About 44 per cent of enterprises reported lower turnover than the pre-pandemic level. About 56 per cent only managed to keep their business on par with the previous years. The industries that reported the major hit include Solar (66.7 per cent reported lower turnover than the pre-pandemic years), Agriculture (62.5 per cent), Engineering (53 per cent), and Construction (50 per cent).

During the year 2021, about 73 per cent of industries reported higher turnover than the pre-pandemic years. During 2022, the proportion reached 77 per cent. This indicates that although there is an increasing number of enterprises that recovered from the pandemic crisis, there are still about 23 per cent enterprises operating at below pre-pandemic level of turnover.

While 30% are yet to recover, construction and health sectors reported 100% recovery. Agriculture, Plastic, and Pharma enterprises reported more than 80 per cent of recovery in 2022. The study has also noted the changes in investment over the period with 22.3% of enterprises operating at investment of less than Rs 10 lakh; 48.9 percent of enterprises mostly employ investment in the range of Rs 10 lakh to Rs 1 crore. Only 8.1 percent of enterprises operate with above Rs 5 crore of investment.

While all the units surveyed have been in operation for the last three years, about 6 per cent of enterprises have reduced their investment, and a similar proportion remained at the same level, 57% of them have more than doubled their initial investment. This implies that the majority of enterprises are doing well in business, as per the study.

(KNN Bureau)