India’s big corporates owe Rs 3.3-lakh crore to MSMEs: Study

New Delhi, Jun 23 (KNN) Amid COVID-19 pandemic, Micro, Small and Medium Enterprises (MSMEs) have already been facing liquidity crisis despite several announcement from the government as India’s big corporates with strong liquidity position held up nearly Rs 3.3-lakh crore of dues to MSMEs, said a study by Brickwork Ratings.

The study has revealed that close to Rs 3.3-lakh crore of MSME funds are stuck with strong, large corporates in the form of receivables.

According to credit rating agency Brickwork Ratings, MSMEs are facing a liquidity crunch on account of two key issues ― lack of a funding line from the banking system, and stretched working capital because of low bargaining power with large corporates to get payments released for materials supplied or services provided.

“Even if 50 per cent of the funds held up by strong, large corporates with high creditor days are released, it will shore up liquidity for the MSME sector by close to Rs 1.6-lakh crore and significantly reduce their liquidity pressure and working capital burden,” said Rajat Bahl, Chief Ratings Officer, Brickwork Ratings.

The BWR study is based on data analysis of the top 1,000 companies in terms of market capitalisation.

As per Brickwork Ratings’ study of top 760 non-BFSI (banking, financial services and insurance) companies’ basis their market capitalisation, only 14% had a negative or low working capital requirement at the end of September 2019. This implies that while they gave lower credit to their buyers, they got high credit from their suppliers.

Given the adverse economic conditions, large corporates have only increased their bargaining power with MSMEs in Q1FY21.

The reduction in the credit period enjoyed by large corporates with strong credit profiles can have a significant impact on easing the liquidity pressures of MSMEs, it said.