MSMEs slash jobs as orders fall

LABOUR SHORTAGE: Many units are not able to get workers as they have left for their respective places during the lockdown.

Hyderabad: Several tiny and micro industrial units, particularly the ancillary units that depend on other units for the job works, have been cut down their workforce by about 50 per cent unable to pay salaries as their orders from their respective clients have thinned due to lockdown. The MSMEs are also finding it difficult to liquidate the piled up inventory, the entrepreneurs said.

For instance, G Krishna, has a unit Sri Laxmi Color Coat at Balanagar Industrial Area. The unit, set up in 2012, does powder quoting jobs works for steel, electricity panel boxes, water meters and furniture and allied segments.

“We are not getting many job works,” he said adding that he is turning to private finance sources as institutional finance is not available to him. Earlier, the unit used to employ 12 people and now only three are coming.

In another instance, HS Industries, which is in to manufacturing and service of machines that are used to pack powder, spices, ghee, tea, coffee, sugar, granules, shampoo and host of other products, has machines which were made before the lockdown started? “Normally, we used to sell about five machines a month. Now, we have not sold a single unit from April,” said K Hari Das, its proprietor. The average cost is about Rs two lakh. Normally, he has customers coming from Maharashtra, Tamil Nadu, Andhra Pradesh and Telangana.

According to him, many are looking for options that are available closer to their place of living due to the difficulty with logistics in the current times.

Hussain, a second generation entrepreneur at Hydari Industries, is focused on making brackets and bolts for the furniture making. The space between the machines is occupied by huge white bags that have finished products packed and kept ready for the customers.

“Stocks worth about Rs five lakh are here and our customers are not coming,” said Hussain adding that the unit gets about Rs 4,000 power bill a month while the rent is about Rs 30,000. Earlier, there were seven employees but now only three have work, he said.

The segment he operates in is price sensitive and any effort to increase the prices will force the customers to find new suppliers, he said.

The summer has seen subdued sales of fans and electric appliances as the markets were closed due to the lockdown. That has impacted ceiling fan ancillary units,a according to M Bhikshapathi, who runs Venkateshwara Enterprises, which makes the fan components. He said the unit has been declared not eligible for the emergency credit announced by the Government.

Units like BNR Galvanising Works, which handles job works for power equipment and hand pump makers makers among others, is now operating only for 10 days a months from the earlier 25 days due to lack of orders. The pending receivables are about Rs 50-60 lakh, he said.

The problems for the units are manifold. If somebody is cutting the employment, others are finding it difficult to find people. “Most the workers in these units are outside people. Now, they left for their places and not workers are available. There is no movement of the finished stocks and raw material is also not available,” said K Koteswara Rao, Convenor, All India Forum for MSMEs.

Government should make an effort to increase the demand by making funds available in the hands of the consumers, said M Prabhakar Rao, also a conveyor of the industry body.
Crisil in a recent note said that MSMES will see a steeper 17-21 per cent fall in revenue while Ebitda margin will to 4-5% as weak demand gnaws away gains from lower commodity prices. The decline will also impact creditworthiness, aggravating the liquidity stretch these units have been grappling with, particularly on the working capital front, it said.

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