HYDERABAD:  Myriad internal problems like lack of proper financial or business planning are prevalent among Telangana’s minor, small and medium enterprises (MSMEs) which make them sick units, a study done by Telangana Industrial Health Clinic said. 

The study which was done among 250 such sick MSME units, found that there were five major reasons behind the slumping fortunes of a majority of MSME units. Speaking about the same during CII Telangana’s MSME DAY webinar on Friday , ‘Rebooting MSMEs in the Post Covid World’, Industries Principal Secretary Jayesh Ranjan said, “First, TIHCL found that their business plan was inadequate or unrealistic. Many simply copied someone else’s idea.

These decisions sow seeds of potential failure.” Second, Ranjan said, MSMEs often made the mistake of relying excessively on banking finance. “Often MSMEs did not have a proper banking plan — what kind of loans to take? Which bank to approach? They relied too much on bank financing without any concrete source of revenue.” 

The third reason behind MSMEs turning into sick units was inadequate adoption of technology. TIHCL found that units often invested in high-end technology even if there was no need for one. “Upgradation of technology was also not being properly done.

They continue to work with old models,” he added. Ranjan pointed out that there were ample digital platforms available which provided guidance on how to go about their daily business making this the fourth reason. “These digital technology platforms are not being properly explored,” he said. Last, TIHCL found that MSMEs lacked in financial management and it often bordered on unprofessionalism.

“Many have poor systems of accounting. Personal withdrawals were not being marked in. These poor financial system transforms into bad financial condition. Their HR system was also found to unprofessional. Workers were often not selected based on the skill,” he added. 

WHAT IS A SICK UNIT?

According to the Ministry of Micro, Small and Medium Enterprises, an MSME is ‘sick’ if any of the borrower account of the enterprise remains a non-performing asset for three months or more or there is erosion in the net worth due to accumulated losses to the extent of 50 per cent of its net worth during the previous accounting year