SME Cluster Series 2013 - Nashik
  

SME Cluster Series 2013 : Nashik

 

Section A: Engineering Industry

The engineering sector in Gujarat has witnessed remarkable growth over the years with many multinational companies setting up their manufacturing base. In fact, Gujarat contributes to more than 10% share of India’s total output in some engineering goods production which includes sponge iron, electric motors, compressors, steel pipes, ball and roller bearings, construction machinery, casting copper rods, textile machinery, transmission line towers, tv picture tubes, submersible pumps, environment control equipment, gears etc. Ahmedabad, Anand, Rajkot, Vadodara, Surendranagar, Jamnagar, Mehsana, Panchmahal and Kutch have emerged as important locations of engineering industries in Gujarat. In fact, Ahmedabad has an SEZs for engineering sector.

Some major highlights from our study of engineering companies based in Ahmedabad are as follows:

Ownership pattern

The ownership pattern of Ahmedabad-based engineering companies is largely dominated by proprietary companies forming 56% of the entire sample, followed by private and partnership firms that accounted for 33% and 11%, respectively.

Revenue classification

According to the survey results, around 48% of the surveyed companies registered a revenue in the range of ` 2.5 mn - ` 5 mn and 26% had a revenue between ` 10 mn and ` 100 mn. While around 7% had a revenue above ` 100 mn.

Revenue share

Almost 52% of the surveyed companies cater only to the domestic market, while around 48% of the companies cater to both the domestic and global markets.

Export destinations

Majority of the companies export mainly to the European countries; African and Asian countries constitute the second most preferred export destination for the engineering firms in Ahmedabad.

Investment in plant and machinery

According to the survey, 52% of the engineering companies in the cluster have invested less than ` 5 mn in plant & machinery, while only 18% have invested between ` 10 mn and ` 50 mn in plant and machinery.

Benefits of operating in a cluster

Among the companies surveyed, majority of the companies revealed that cost effectiveness and easy procurement of raw materials are the key benefits that they derive out of operating in this cluster. Moreover, the survey also points out that the companies consider government support to facilitate their business to be quite low.

Challenges faced by the engineering cluster

The companies face certain challenges in conducting their business operations. Taxes and octroi levied by the government has been stated by majority of the respondents as the key challenge. Further, the survey also revealed that arranging finance for working capital followed by inadequate power supply were the other major challenges faced by the engineering companies.

IT adoption among SMEs

The results revealed that the IT adoption among the firms operating in the engineering cluster in Ahmedabad was negligible. Only 9.0% of the total surveyed companies stated that they have adopted IT for their business processes.

Challenges for adopting IT in business

The survey also revealed that the major challenges faced by the engineering firms in adopting IT was the lack of capital or cost of technology followed by non-availability of easy finance and skilled labour.

Major drivers for technology upgradation

However, according to the survey, the major drivers for IT adoption among the firms who have adopted IT are customers demand and increasing productivity.

Section B: Pharmaceutical Industry

The pharma industry in Ahmedabad produces a variety of products including antibiotics, anti-asthmatics, anti-malarial, anti-allergy, anti-inflammatory, anti-hypertensive, anti-diabetics, central nervous system drugs, formulations, herbal supplements and extracts as well as capsules. The key findings of the study on the pharma companies are as follows:

Ownership pattern

The survey conducted by D&B among the pharma companies present in the Ahmedabad cluster revealed that around 50% of them are partnership firms; the private limited and proprietary firms comprise 40% and 10% each.

Operational analysis

According to the survey results, in FY11, close to three fourth of the sample of pharma companies had turnover between ` 10 mn and ` 100 mn, whereas only 9% of the sample companies had a turnover of upto ` 5 mn. Moreover, around 9% of the sample companies had a turnover of more than ` 100 mn.

Around 50% of the companies in the sample are engaged in exports. Of these companies, almost all have revenues between ` 10 mn and ` 100 mn. Of the companies which are engaged in exports, for as much as 60% of them, exports do not account for more than 10% of their revenues. In the surveyed sample of pharmaceutical companies, around 90% of them are domestic oriented (companies generating revenue both from domestic as well as exports) of which around 38% of them cater only to the domestic market.

Around 70% of the domestic-oriented companies had revenues between ` 10 mn and ` 100 mn, while only around 15% of the companies had turnover in the bracket of ` 2.5 mn – 5.0 mn. On the other hand, companies catering to both export and domestic market had revenues in the bracket of ` 10 mn to ` 100 mn.

Export destinations

The major export destinations for the respondent sample of companies in the Ahmedabad cluster are Africa, Europe, Russia and Australia. The survey revealed that close to 43% of the respondents export to Africa. Only, around 14% of the surveyed pharma companies export to Russia and Australia.

Operational details

Only a small proportion of the companies have made relatively high investments in plant and machinery. The survey revealed that more than 80% of the companies surveyed in the cluster have invested less than ` 10 mn in plant and machinery. Further, only around 18% of the companies had invested between ` 10 mn and ` 50 mn in plant and machinery.

Advantages of working in the cluster

The survey revealed that the Ahmedabad cluster provides various benefits to the companies. The respondent companies rated easy availability of man power as the chief benefit of operating in this cluster with three fourth of the companies confirming it.

Challenges faced by pharma companies in the Ahmedabad cluster

Although companies derive numerous benefits from operating in the Ahmedabad cluster, they are not immune to certain types of challenges. Fluctuating/increasing input prices has emerged as the single largest challenge for these companies in the cluster, with around a quarter of companies confirming the same. Inadequate power supply has been cited as the least challenge among the surveyed companies.

Technology scenario

Among the pharma companies surveyed in the Ahmedabad cluster around 64% have adopted IT in their business. Moreover, among the companies adopting IT in their business, expenditure on IT as a percentage of total expenditure is relatively low; around 86% of the respondents have an IT budget of upto 2% and only 14% companies have IT budget between 2% and 5%.

Major drivers for technology upgradation

Most of the companies in the sample that are utilising IT products attributed staying ahead of competitors as the most important driver for technology upgradation.

Challenges in IT adoption

Although there are drivers for technology upgradation, there are also challenges faced as well. Lack of capital or costly technology has been cited as the major challenge faced by the respondent companies in the Ahmedabad cluster. Non-availability of easy finance has been ranked as the least challenge faced by the respondent companies while adopting IT in their business.