“If you're a small entrepreneur or planning to start a business, it's important to understand the significance of MSMEs (Micro, Small, and Medium Enterprises) and the support available to help you grow,” says Ashique AM, founder and CEO, Ashique & Associates.
Speaking to budding entrepreneurs at Dhanam Business Media summit recently, he exhorted the entrepreneurs to explore how MSMEs contribute to the economy and what opportunities they can use.
Growth of MSMEs
The MSME Act was introduced in 2006, at a time when MSMEs contributed just 8% to India’s GDP. Since then, their role in the economy has grown significantly. Today, MSMEs account for 30% of GDP, and the government aims to increase this to 50% by 2026–2027. This means there is enormous potential for small businesses to thrive.
In terms of registration, 7.5% of MSMEs are already formalised, and the Compound Annual Growth Rate (CAGR) is 2.5%. MSMEs also contribute 45% to the Indian economy, with half of that coming from exports. Over 11 crore jobs are currently being generated by MSMEs. “So, if you're looking to build a sustainable business, this sector is a solid foundation,” said the CEO of the Ashique & Associates that offers integrated corporate, secretarial, financial, and legal services to more than 1,000 clients, spread across India and GCC.
Value of data
“As a budding entrepreneur, it’s essential to understand the value of data. Tracking your progress and keeping correct records will help you make informed decisions and show your growth to potential investors. If you're unsure about data management, don't hesitate to seek advice – remember, every successful entrepreneur continuously learns and adapts,” Ashique, who goes by one name, said.
The Ministry of MSMEs has put in place several schemes and resources that can guide the entrepreneurs along the way. “You should fully take advantage of this kind of support,” he advised.
Stock listing isn’t for just Tata or Reliance
“One common misconception you may encounter is that listing your business on stock exchanges is only for big companies like Tata or Reliance. However, the government launched the SME listing platform under NSE and BSE in 2012 to provide small businesses with the same opportunities. While it initially struggled, by 2017, the SME listing platform became a vital tool for unlocking the true value of businesses, including smaller ones like yours,” Ashique said.
Benefits of listing
“Listing your business can help you raise capital, grow your market presence, and enhance your credibility. Contrary to the belief that only large companies benefit, even small businesses have seen success through listing. In fact, every month, around 20 SMEs are listing their shares, and in the last fiscal year alone, 200 companies were listed, raising Rs 7,425 crore in funds. This is an opportunity that more small businesses should be exploring,” he pointed out.
Open to all
SME listings are open to businesses across all sectors. Kerala, for example, has seen a shift from agriculture to non-agricultural sectors, with 85% of its economy now being driven by non-agricultural businesses.
This shows the diversity of sectors where small businesses can succeed. “So, whether you’re in trading, manufacturing, or services, the platform is there for you,” Ashique said.
“You should take a close look at your sector and see how SME listing could help you grow your business,” he said, adding, “as of July, over 1,000 SMEs have been listed, showing the growing trend of small businesses taking advantage of this opportunity. It’s your chance to be part of that growth story.”
Boomtime for SME IPO
In 2023, a record number of companies went public in India, and the momentum has carried forward into 2024, livemint.com reported in July this year.
"According to Trendlyne data, 153 companies in H1FY24 have made their stock market debuts, with 117, accounting for 77%, originating from the SME segment," the report said.
The report quoted Kush Gupta, Director at SKG Investment & Advisory, as saying: "I think we will continue to see an increase in the number of listings, IPO market will remain busy because that’s a fundamental shift in India’s equity landscape.”