Revenues of small and medium enterprises (SMEs) are unlikely to improve in the next 12-18 months, making it difficult for at least one out of four such companies to service their loans, India Rating and Research Pvt. Ltd (Ind-Ra), the local arm of global rating agency Fitch Inc., has said in report. The agency added that 46.3% of bank loans to listed to SMEs with revenue size of below Rs.300 crore are in "significant stress".
As reported by business
daily Mint, the revenue growth (median) of small companies has fallen
from fiscal 2009-10 and has been in low single digits since fiscal
2010-11. Large companies (represented in BSE 500) and medium
companies also witnessed a slow revenue growth only fiscal 2012-13
Despite real estate, the
global rating agency has given a negative remark on all sectors like
chemical, textiles, power, steel and construction.
It also reported that
sectors already under stress have the highest number of SME
corporates with potential issues in servicing even the interest
component. The construction sector holds the highest number of SMEs
(36.5%), real estate (33.8%), power (30.6%), textiles (28.5%) and
All these SMEs mostly
depend on large companies' payments. "Unless the working capital
days of large corporates come down significantly to below 50, the
working capital cycle of SMEs is unlikely to improve," the agency
said in its report.
It would require the
economic activity to reach the level last observed in 2010-11 to
2011-12. This is unlikely to happen in the next 12-18 months, it