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D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
D&B - British Airways SME Cluster Series 2014: Ahmedabad
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D&B - British Airways SME Cluster Series 2014: Ahmedabad

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This report focuses …

This report focuses
on SMEs from Chemical, Engineering, Construction and other sectors in the Ahmedabad region and
offers insights on the status and scenario of the SMEs operating in the Ahmedabad cluster, in terms
of their financing requirements and preferences, export challenges, outlook on growth prospects and
various other parameters.

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  • 1. I Dun & Bradstreet India (D&B India), in association with British Airways reinforces its commitment towards the development of small and medium enterprises (SMEs) with the launch of its cluster-based report series, “D&B - British Airways SME Cluster Series 2014: Ahmedabad”. This report focuses on SMEs from Chemical, Engineering, Construction and other sectors in the Ahmedabad region and offers insights on the status and scenario of the SMEs operating in the Ahmedabad cluster, in terms of their financing requirements and preferences, export challenges, outlook on growth prospects and various other parameters. Some of the key findings from our study are as under:- Majority of the firms are bullish about their sales turnover during FY14 – around 71% indicated• an increase as compared to 6% who stated a decrease. ThesurveyfindingshighlightthattheSMEsinAhmedabadattributetheemergenceofAhmedabad• as a major industrial hub largely to the following three factors: its geographical advantage (81%), access to ports & road connectivity (64%) and lower cost of setting up business as compared to other competitive locations (48%). However, government support, availability of more skilled manpower and better infrastructure• were cited as the major factors by the SMEs which would help them to enhance their competitiveness. Asubstantial 72.5% of the SMEs surveyed cited that they are not aware of the various government• schemes such as “Capital subsidy for adopting new Technology (CLCSS) for upgrading/ modernising technology for SMEs. Furthermore, of the SMEs who are aware of such programmes, 63% have availed of the schemes, while 37% have not. Only one third of the SMEs rated both ease to procure finance and the documentation process to• obtain finance as easy and nearly 63% of the respondents expect more transparency as the most crucial factor which can boost SMEs funding. Hiring people with specialised skills is one of the major challenges for SMEs in Ahmedabad• while reaching out to target customers was rated as easy or extremely easy by almost 45% of the SMES surveyed. Asignificant 48% of the respondents indicated that overseas laws & regulations and 45% indicated• collection of payment to be the biggest export related challenge faced by them. Nearly one-third of the SMEs undertake more than 5 domestic business trips by airways annually• while 28% make 2-5 international business trips per year and around 17% of SMEs make more than 5 international trips. More than one third of the SMEs allocate 3-5% of their companies’total budgeted expenditure for• their business airfare travel needs. Asia, followed by Europe, South America and Africa emerged as the most frequently travelled• destinations by the SMEs in Ahmedabad. The study reflects that over half of the surveyed SMEs in Ahmedabad expect their industry to• grow by 5-10% during FY15. Nearly 60% of the SMEs in Ahmedabad cited that they are likely to focus on retaining existing customers during FY15, as part of their future business growth strategy. Key Findings
  • 2. 1SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Ahmedabad Cluster Insights Dun & Bradstreet India (D&B India) carried out a comprehensive study based on a primary survey of the small and medium enterprises (SMEs) operating and based in Ahmedabad. The objective of the primary survey was to highlight the business trends of the SMEs operating in Ahmedabad, in terms of their operations, financing, technology, exports, outlook on growth prospects and major challenges faced. Companies with a total income below ` 1,000 mn during FY13 were considered for the purpose of the survey. From the Manchester of India, with the largest share of employment in cotton textile industry, Ahmedabad has emerged as a favourable location for pharmaceutical, automobile and engineering, agro and food processing, textile and apparel, chemicals and dyes and information technology industries, and in the recent few years, a centre for education and health tourism. There are 11 special economic zones in Ahmedabad district, 12 industrial estates and 10 industrial parks. Ahmedabad has also emerged as a major financial centre. Some of the key findings from our primary study are highlighted in this section. Ahmedabad SME Cluster - SME Perspective Majority of the companies fall in the income bracket of upto ` 10 million As per our survey 41% of the SMEs operating in the Ahmedabad cluster had an annual income of upto ` 10 million during FY13 and 30% belonged to the income group between ` 10 mn - ` 100 mn. Further, 17% of the total surveyed SMEs were in the income group ` 100 mn - ` 500 mn and 12% in the income group of ` 500 mn - ` 1000 mn. Sector-wise income composition (%) Source: D&B Research In the income group upto ` 10 million, 50% of the companies were in the engineering sector followed by chemicals (18%). In the income group of ` 500 to ` 100 million, majority i.e. 38% were in the chemical sector followed by engineering (25%) and FMCG (25%). In terms of annual performance during FY14 majority of the firms are bullish about their sales turnover during FY14 – around 71% indicated an increase as compared to 6% who stated a decrease.
  • 3. 2SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Sales turnover in FY14 vs FY13 (%) Source: D&B Research Sector wise, the chemical sector was very optimistic. Out of the total SME’s who indicated an increase in their sales turnover, 37% were in the chemical sector, followed by 20% in engineering and 14% in textile and garments. Financing Trends Only one third of the SMEs rated both ease to procure finance and the documentation process to obtain finance as easy Around 20% of the SMEs rated documentation process to obtain finance as difficult. In terms of access to alternative source of finance 21% rated it as difficult and 44% rated access to alternative source of finance as moderately easy. Financing availability parameters Source: D&B Research
  • 4. 3SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights More transparency among financial institutions for financing SMEs emerged as the most important measure to enhance SME funding Less transparency among the financial institutions is one of the major obstacles which SMEs in Ahmedabad face while sourcing finance. Thus, nearly 62% of the respondents expect more transparency as the most crucial factor which can boost SMEs funding. This was followed by collateral free loans from financial institutions would be the next important step that would boost SME funding. Around 54% of the respondents stated that the limit up to which bank’s grant credit should be increased to improve SME funding. On a sectoral level, collateral free loan is one of the most important factors considered by the engineering SMEs that will boost funding whereas SMEs in the chemical sector found making credit rating mandatory to boost SME financing. Measures to boost SME funding (%) Source: D&B Research Human Resource Related Trends Hiring people with specialised skills is one of the major challenges for SMEs in Ahmedabad One of the most critical human resource challenge faced by the SMEs in Ahmedabad was hiring people with specialised skills with 28% indicating the same. Managing salary expectations emerged as the other major human resource challenge faced by these SMEs. Human Resource related challenges faced by SMEs in Ahmedabad (%) Source: D&B Research
  • 5. 4SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Awareness of Government schemes Majority of the respondents in Ahmedabad are unaware of the various government support schemes provided for SMEs A substantial 72.5% of the SMEs surveyed in Ahmedabad cited that they are not aware of the various government schemes such as “Capital subsidy for adopting new Technology (CLCSS) for upgrading/modernising technology for SMEs. Furthermore, of the SMEs who are aware of such programmes, 63% have availed of the schemes, while 37% have not. Furthermore, a substantial 72% of the surveyed companies indicated that they do not participate in the government’s various training and skill development programmes available for SMEs. Of the SMEs who do take part in such programmes, 68% indicated that they find such programmes ‘Moderately Beneficial’ and 21% find such programmes ‘Extremely beneficial’. However, about 11% also indicated that they do not find these programmes beneficial. Participation in governmnet’s training & skill development programmes (%) Source: D&B Research Access to market and marketing Around 38% of the SMEs reported export revenue to constitute 0-20% of their estimated revenues for FY14 The survey revealed that for 38% of the surveyed SMEs in Ahmedabad, their export revenues would be in the range of 0-20% of their total revenues in FY14. Another 30% estimate the share of their export revenues in total revenues to be in the 20-40% range during FY14. Majority of the export related companies belonged to the chemical sector followed by engineering and textiles.
  • 6. 5SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Share of exports in total revenues in FY14 (%) Source: D&B Research The survey revealed that for 38% of the surveyed SMEs in Ahmedabad, their export revenues would be in the range of 0-20% of their total revenues in FY14. Another 30% estimate the share of their export revenues in their total revenues to be in the 20-40% range during FY14. Majority of the export related companies belonged to the chemical sector followed by engineering and textiles. Overseas laws & regulations and collection of payment are the two major challenges faced by SMEs in the export markets Major export related challenges (%) Source: D&B Research The survey results revealed that overseas laws & regulations and collection of payment were the two most important challenges faced by the exporters in Ahmedabad. For the engineering companies factors such as meeting international quality standards, collection of payment, overseas laws & regulations are the major challenges faced while dealing in exports market.
  • 7. 6SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights SMEs in the chemical sector indicated overseas laws & regulations, trade financing and high export duties as the key hurdles for the exports. For the companies in the textile sector lack of market information was the most important challenge amongst others. In the construction sector high export duties and collection of payment are the critical challenges faced by the SMEs. Marketing related parameters (%) Source: D&B Research Availability of skilled marketing & sales personnel was rated as moderately easy by almost half of the surveyed SMEs in Ahmedabad while reaching out to target customers was rated as easy or extremely easy by almost 45% of the SMEs surveyed As per the survey results, for the SMEs in Ahmedabad marketing their products are not too difficult. SMEs in Ahmedabad revealed that availability of skilled marketing & sales personnel was not difficult for them. Only 15% expressed difficulty in sourcing skilled marketing & sales personnel, while 36% stated it was easy or extremely easy for them. Around 45% confirmed it was moderately easy. SMEs’ in the engineering, construction and chemical sector find it moderately easy to avail skilled marketing & sales personnel. Majority of the respondents i.e. 39% declared that reaching out to target customers was moderately easy while only 13% rated it as difficult. Around 45% rated it as easy or extremely easy. SMEs in the engineering and construction sector find it relatively easy to reach out to target customers while a considerable section of the SMEs in the textiles and garment sector find it difficult to reach out to their target customers. Infrastructure Facilities Nearly 45% of the surveyed SMEs in Ahmedabad rated ‘roadways & highways connectivity’ as extremely easy, while more than one-third of the companies rated ‘access to ports and airports’ as easy In terms of the status of infrastructure facilities in Ahmedabad, access to ports and airports was rated as easy by as much as 36% of the respondents, while another significant 32% rated this as extremely easy. Similarly, connectivity to roads and highways in Ahmedabad was rated as extremely easy by 45% of the SMEs surveyed. In addition, around 32% of the SMEs in Ahmedabad rated connectivity to roads and highways as extremely easy. Nonetheless, a minor section indicated their discomfort towards access to ports and airports in Ahmedabad. A sector-wise and income-wise analysis of the survey findings indicate that 20% of the SMEs belonging to construction sector and 19% of the companies with income between ` 10 mn and ` 100 mn rated access to ports and airports as difficult.
  • 8. 7SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Infrastructure facilities in Ahmedabad (%) Source: D&B Research SME Business Travel Trends Trend of domestic & international business trips (%) Source: D&B Research Nearly one-third of the SMEs undertake more than 5 domestic business trip by airways annually while 28% make 2-5 international business trips per year The survey reveals that a significant section i.e. 32% of SMEs undertake more than 5 domestic business trips in a year, while only 16% make 1 domestic business trip by airways. Among the SMEs who opted for international travel, a considerable 28% undertake 2-5 business trips annually, 17% make more than 5 international trips while only 19% make 1 international trip.
  • 9. 8SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Sector-wise trend in international trips Source: D&B Research Around 41% of the SMEs in the chemical sector undertake the maximum number of internationally trips, i.e more than 5 trips annually while 44% of the SME’s in other sectors (mostly in textile and garments) undertake 2-5 international trips. Nearly one third of the SMEs in the engineering and construction sector make 1 international trip annually. Sector-wise trend in domestic trips Source: D&B Research The survey data reflects that one third of the SMEs in the construction sector as well as in the other sectors category (mostly in textiles and garments) and 41% of the SMEs in the chemical sector undertake more than 5 domestic business trips annually. Around 39% of the SMEs in the other sectors category who belong to textile and garments, FMCG and metals sector make 2-5 domestic business trips. One fourth of the SMEs in the engineering sector and nearly one third of the SMEs in the chemical sector make 2-5 domestic business trips.
  • 10. 9SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Sector-wise: Budgeted allocation for business airfare travel Source: D&B Research More than one third of the SMEs allocate 3-5% of their companies’ total budgeted expenditure for their business airfare travel needs Around 36% of the total SMEs surveyed allocate 3-5% of the total budgeted expenditure for their business airfare travel needs. Within the sectors, 41% of the total SMEs in the engineering sector, 44% of the SMEs in the construction sector and 36% of the total SMEs in the chemical sector allocate 3-5% of the total budgeted expenditure for their business airfare travel needs. Majority of the SMEs participating in the survey i.e. 45% have revealed to have allocated only up to 2% of the total budgeted expenditure for their business air travel requirements. In that budget category, 56% of the SMEs in the other sectors category (comprising of textile and garments, FMCG and metals) and 45% of the SMEs in the chemical sector have indicated to have reserved only upto 2% of the total budgeted expenditure for their air travel needs. Only 14% of the SMEs in the chemical sector have indicated to allocate a higher share i.e. 11 - 15% of the total budgeted expenditure for their air travel needs. Asia, followed by Europe, South America and Africa emerged as the most frequently travelled destinations by the SMEs in Ahmedabad The survey indicates that Asia is the most frequently travelled destination with 57% of the respondents opting for the same. While Europe is the second frequently travelled destination, only 38% indicated this. The survey also reveals that 20% and 12% of the total SMEs and travel to Africa and Australia respectively as well.
  • 11. 10SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Most frequently travelled destinations (%) Source: D&B Research Three fourth of the total SMEs in the chemical sector and 50% of the total SMEs in the engineering sector identified Asia as the most frequently travelled destination. Around 45% of the SMEs in the chemical sector and 30% of the SMEs in the chemical sector opted Europe to be their frequently travelled destination. Around 18% of the SMEs in the chemical sector indicated Africa to be their international travel destination. Value-added services offered by airline companies emerged as the most important benefit sought by the SMEs while choosing a particular airline As per the survey, 70% of the SMEs stated that value-added services offered by airline companies are the biggest benefits derived by them upon choosing a particular airline. Reward points/corporate discounts followed by free travel insurance were considered by the SMEs as the other most important benefits that they receive with 64% and 58% of the respondents selecting these parameters, respectively. Benefits of choosing a particular airline (%) Source: D&B Research
  • 12. 11SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Lowering class of travel, reducing conference/exhibition travel and using the cheapest airline are as the important measures which the SMEs plan to take in order to manage their business travel cost over the next year The SMEs in Ahmedabad ranked the parameters lowering class of travel, reducing conference/exhibition travel and using the cheapest airline in the below given preference order indicating that they would take into consideration these options while managing their business travel costs over the next year. Managing business travel cost over the next year Source: D&B Research Advantages and barriers to business growth in Ahmedabad SMEs in Ahmedabad cited geographical advantage and access to ports and road connectivity as the top two factors that have led to the emergence of Ahmedabad as a major industrial hub. As shown in the chart below, our survey findings highlight that the SMEs in Ahmedabad attribute the emergence of Ahmedabad as a major industrial hub largely to the following three factors: its geographical advantage (81%), access to ports & road connectivity (64%) and lower cost of setting up business as compared to other competitive locations (48%). Factors for Ahmedabad emerging as a major industrial hub (%) *As compared to other competitive locations;**including foreign players Source: D&B Research
  • 13. 12SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights As per majority of surveyed SMEs, the two major growth barriers in Ahmedabad were poor access to finance and deficiency in availability of skilled manpower Overall, inadequate access to finance and dearth in availability of skilled manpower emerged as the two major growth barriers for SMEs operating in Ahmedabad. Furthermore, about 75% of the companies falling under the income bracket of ` 500 mn to ` 1,000 mn indicated government regulations as a major growth barrier. While 75% of respondents with income in the range of ` 100 mn to ` 500 mn cited dearth in availability of skilled manpower, another 66.7% of SMEs under the income range of ` 10 mn to ` 100 mn indicated low budget for technology implementation/upgradation as a major barrier for their company’s growth. Asector-wise analysis of the survey findings reveals that majority (59%) of the SME in the chemicals sector cited government regulations and unavailability of skilled manpower as the two major growth barriers, while around 90% of the surveyed engineering SMEs indicated poor access to finance in ahmedabad as a major barrier to growth of their company. Major barriers to growth for SMEs in Ahmedabad (%) Source: D&B Research Growth Strategies & Outlook Over half of the surveyed SMEs in Ahmedabad expect their industry to grow by 5-10% during FY15 As per the survey results, around 51% of the surveyed SMEs in Ahmedabad expect their industry to grow by 5-10% during FY15. While 23% of the respondents expect their industry to record less than 5% growth, another considerable proportion (22%) of respondents expect their industry to grow by more than 10% during FY15. Nonetheless, a smaller proportion (1.4%) of the surveyed SMEs anticipates industry growth to decline by less than 5% in FY15. Asectoral analysis reveals that nearly 63% and 42% of the SMEs from chemicals and engineering sectors respectively expect their industry to record moderate growth of 5-10% during FY15. While a significant 37% of the engineering companies expect the industry to post less than 5% growth in the coming fiscal year, more than one-fourth (27%) of the respondents operating in the chemicals sector expect the industry to grow by more than 10% in FY15.
  • 14. 13SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Outlook on industry growth for FY15 (%) Source: D&B Research As part of their business growth strategy for FY15, majority of the SMEs in Ahmedabad are likely to focus on retaining existing customers Nearly 60% of the SMEs in Ahmedabad cited that they are likely to focus on retaining existing customers during FY15, as part of their future business growth strategy. Moreover, over 57% of the respondents also indicated that they are likely to focus on exploring opportunities in newer markets and/or launch new products and services during FY15. Business growth strategies (%) Source: D&B Research
  • 15. 14SME Cluster Series 2014: AhmedabadAhmedabad Cluster Insights Factors that can enable SMEs in Ahmedabad to become more competitive Government support, availability of skilled manpower and better infrastructure were the major factors cited by the SMEs to help enhance their competitiveness As per our survey finding, below are some of the factors that according to the SMEs in Ahmedabad would enable them to become more competitive. In addition to the above, the surveyed SMEs operating in Ahmedabad opined that factors like additional financing options, collateral free loans, ease in raw materials availability, favorable government policies and support schemes, low prices for raw materials, information on working capital management, lesser government regulations and more transparency in documentation would also enhance their competitiveness.

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