The SME (small and medium enterprises) and startup sector in India are currently reeling from the coronavirus crisis. The lockdown has meant that business has halted and the revenue for many small companies has partially or completely dried up. A whopping 47% of Indian startups and SMEs have said that they have less than one month of cash left and 27% are already out of funds.
This was revealed as part of a survey conducted by community platform LocalCircles among small businesses including startups, SMEs and entrepreneurs to get a pulse on how their business is doing in the middle of the COVID-19 crisis and how they foresee their company’s health in the next few quarters. The survey received over 13,970 responses from startups and SMEs located in 90 districts of India.
Startups were asked that in the current scenario and their current monthly operating costs, how many months of cash does their business have. While 6% said they are covered for over 6 months, 23% said they have runway for 3-6 months and 24% said they only have cash for 1-3 months. Another 20% startups said their cash would only last them less than a month while 27% startups and SMEs said they are already out of funds.
Startups and SMEs were also asked what they foresee happening to their business in the next 6 months. While 61% said they are looking at scaling down, 7% are looking at selling their business. Another 13% said they are looking at a complete shutdown while 13% said they are looking at growth.
In a survey conducted in the last week of March, startups and SMEs via LocalCircles had submitted various demands to the government to help them tide over the current crisis. These included reimbursement of 50% of startup employee salaries for one month or a one-time Rs 20 lakh grant for government registered startups.
Other demands included expediting PSU (public sector undertaking), government and large corporate payments to startups, processing TDS (tax deducted at source) refunds for FY 2019-20 within 15 days and enabling CSR (corporate social responsibility) funds to be deployed into startups.
Many VCs (venture capitalists) and entrepreneurs have said that the next 6 months will be very critical for the Indian startup ecosystem and thousands of people could face layoffs.
The CEO of NITI Aayog had recently assured that the Finance Ministry is taking several measures to help the MSME (micro, small and medium enterprises) sector and a relief package will be announced soon. Even the technology companies, who have seen a spike in the usage of their platforms, have not been able to translate this demand into revenue. Some entrepreneurs also believe that the lockdown will push their startups back by one to two years. Tech platforms like Swiggy and Zomato have launched grocery delivery services to cope with the loss of revenue and many other companies too are trying similar things.
LocalCircles is planning to write to the Finance, Commerce and MSME Ministers as well as senior officials in Finance Ministry, DPIIT (Department for Promotion of Industry and Internal Trade) and MSME Ministry briefing them on these findings and requesting them to urgently implement measures to protect the startups and SMEs of India.