News Letter
Date: 02/12/18
Equity kind of stake for the revival of sick MSME
Sri Ajay Shankar Prof at TERI has advocated for creating a fund by various methods to bring equity kind of investment in many large corporates for the revival with either change in investment or supporting existing by value creation.
We are proposing the same for last 2years for MSME and have already made 3 investment and in next 3 to 4 years, expect 15 to 25% return year on year basis.
As the fund required to turnaround for MSME in loan range of 1cr to 10cr will be around 5lacs for running units and cost of job retained will be @15000 against creating one job by capital investment 50000 to 300000lacs.
Handholding is very critical and the process will be a crisis, stabilization & growth management.
In the Crisis phase, our person will monitor daily activity with a focus on operational efficiency and utilization of idle capacity and focus on troubled activity solution, mainly accounts management. Our back office will prepare a marketing plan and various hurdles which can be predicated and resolving it. This phase can be 2 to 6 months.
The second phase will be stabilization which can be 3 to 12 months, where systems like MIS will be introduced, inventory management, data mining HRM and controls will be established and watched with great care to its effect on operational efficiency and increase in idle capacity utilization and cost cutting or cost efficiency.
If bankers agree, with or without further finance, growth plan will be made and implemented.
This will require 2 round of equity infusion. One of crisis stage where valuation of the asset will be very low and after stabilization where valuation can be higher than the first round. In 3 years to 5years, exit can be listing on SME Exchange, promoters buyback or other investors entering or replacing as the case may be.
Funding can be done by social entrepreneurs who are looking to change the landscape for employment or by crowdfunding, or creating an SPV for an alternative investment fund and 10 to 15% return can be generated on this.
Govt can facilitate this and no budgetary support is required.
Request all stakeholder to comment/give a suggestion.
Regards,
N.P. Desai
Chief Consultant
Mob: 9885326553
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