Untitled Document
  
 

This chapter focuses on the characteristics of the SME companies in the chemical, textile and pharmaceutical industry in the Mumbai cluster, and is based on the primary data collected through a survey. The chapter looks into the operational aspect and also deals with the level of IT adoption among these companies. Out of the total companies contacted in the MMR region, the data from respondents was used for the analysis. Moreover, there is an equal representation from all the three industries.

Private companies dominate MMR

According to the survey results, private limited companies dominate the Mumbai cluster. In the sample companies also, private companies accounted for around 58% of the total companies followed by the partnership firms which accounted for 19% of the surveyed companies.

Among the private limited companies surveyed in the cluster, 42% companies belong to the pharmaceutical sector whereas chemical companies constituted approximately 34% of the total private limited companies.

Another interesting feature of the companies in the cluster was, that out of the total proprietary and partnership companies majority were textile manufacturers.

The industrial development gathered momentum in Mumbai after 1975. The companies that were incorporated after 1975 constituted almost 86% of the respondent companies. Among these companies, 44% were set up during 1975-90 and 41% were set up during 1990-2005.

70% of companies in cluster are exporters

The survey has revealed that majority of the companies in the Mumbai cluster are exporters. This directly follows from the well developed infrastructure and connectivity of the region with the external markets. Moreover, the nature of all three industries also leads to higher proportions of exporting companies.

As per the survey, 30% companies surveyed in the cluster cater solely to the domestic market. Among these companies, 37% companies belong to the chemical sector. However, there was a significant share of companies whose major share of revenue comes from exports. According to the survey, almost 9% of the respondents derive their entire revenue from exports. Approximately 62% of these companies belong to the textile sector.

European and US markets as preferred export destinations

As per the survey, Europe, America and Middle East emerged as the most preferred export destination for the respondent companies in the cluster. Other export destinations cited by the respondents include Asia and Africa.

Higher IT adoption in companies in Mumbai cluster

Among the respondent companies in the survey more than 80% companies use some IT product and services in their operation. Among these IT adopting companies approximately 38% companies belong to the pharmaceutical sector.

Despite a high utilisation of IT among the respondents, 69% of the companies spend less than 1% of their expenses on IT. Approximately 42% companies that spend less than 1% on IT belong to the pharmaceutical sector.

The survey reveals the various challenges that the respondents face in adopting IT in their business. Approximately 38% respondents indicated cost of implementation as one of the challenges whereas almost 39% respondents cited scalability constraints (too small a business for IT implementation) as one of the key challenges faced by them in adopting IT in their business.

Among the respondents that cited high cost of implementation as one of the challenges in IT adoption, almost 40% belonged to the pharmaceutical sector followed by 31% respondents that belonged to the textile sector. Whereas among the respondents that cited scalability constraints as one of the challenges, approximately 40% belonged to the chemical sector.

Large number of companies still unregistered

Out of the total respondents, a high number of companies are still unregistered. Nearly 49% of the respondents are unregistered in the Mumbai cluster. This is important in the light that many governmental development schemes and benefits may not be passing on to these unregistered units. Of the total unregistered companies, around 48% belonged to chemical industry.

More than 42% of the unregistered respondents stated that they were not interested in the registration. Another 27% stated that they were not aware of the registration process. Also, around 4% were of the view that the registration process is a complicated procedure.

Section A: Chemical Industry

Many chemical companies are located across the Mumbai cluster but there are certain areas such as Badlapur that are specifically reserved for these companies. The chemical companies produce almost all products in the chemical product segment.

The main highlights from the primary data collected on the SMEs in the chemical industry are presented below:

Characteristics of the chemical companies in the Mumbai cluster

Ownership pattern

As per the survey, private limited companies dominated the chemical companies in the cluster, constituting 60% of the sample. The partnership and proprietorship firms constituted 20% each of the surveyed companies.

Segment-wise classification

The survey reveals the various segments in which the chemical companies in the Mumbai cluster operate. Among these segments organic chemicals and inorganic chemicals were the two prominent segments which were a part of the business operations of the respondent companies.

Among the companies that cited organic chemicals as one of their segments, approximately 25% companies had their own brands. The use of brands among the companies that indicated inorganic chemicals as one of their segments was even lower at approximately 14%.

Industries served

Chemicals are used as raw materials and as processing agents of various intermediary products by many industries. The chemical companies surveyed in the cluster cater to various industries like pharmaceutical, agrochemicals, paints, plastic, food processing, textiles and others. Among these industries, the pharmaceutical industry emerged as the most prominent industry catered by the respondent companies in the cluster.

Operational analysis

Revenue classification

As per the survey, the turnover of 48% of the chemical SME’s was less than Rs 40 mn during FY09. The respondent companies whose income was more than Rs 250 mn constituted 7% of the sample.

Exports

The major export destinations for the respondent SME’s in the Mumbai cluster were Europe, US, Middle East and Asia. Europe emerged as the most preferred export destination.

As per the survey, approximately 33% of the companies catered only to the domestic market while 30% of the companies generated 50% or more of their revenue from exports.

Production details

Capacity utilisation

Majority of the chemical SME’s (60%) in the cluster have a capacity utilisation of 70% and more. All the surveyed companies work in two working shifts on an average and 30% companies have more than one plant. As per the survey, almost 50% chemical companies were operating at or above 80% capacity utilisation, pointing to high level of efficiency among the companies.

IT adoption in business

According to the survey, IT adoption is largely prevalent among the chemical SME’s with more than 75% of the respondents belonging to this industry adopting IT in their business. However, the share of expenditure on IT of 58% of the chemical SME’s was less than 1%. The survey also revealed that only 4% of the respondents are planning to increase their IT budget.

Challenges faced by companies in IT adoption

The survey revealed the various challenges faced by the chemical SMEs while adopting IT in their business. As per the survey, almost 81% respondent chemical SMEs cited scalability constraints (too small a business for IT adoption) as one of the challenges hindering IT adoption.

Section B: Pharmaceutical Industry

The Indian pharmaceutical industry has emerged as a global hub for pharmaceutical manufacturing with quality producers and many internationallyapproved manufacturing units. The industry is also emerging as a hub for contract research, clinical trials, biotechnology and clinical data management services.

The Indian pharmaceutical industry ranks third in the world in terms of volume of production and constitutes 10% of global pharmaceutical production whereas in terms of value, it is the fourteenth-largest in the world and accounts for a 1.5% share in the global pharmaceutical market.

Some highlights from our study of pharmaceutical companies based in Mumbai cluster are as follows:

Characteristics of the pharmaceutical companies in the Mumbai cluster

Ownership pattern

Private players dominate the pharmaceutical industry in the Mumbai cluster and constitute 73% of the surveyed pharmaceutical companies, besides proprietary and partnership firms that constitute 10% each of the surveyed companies.

Most pharmaceutical companies in the Mumbai cluster manufacture their own products whereas only 27% companies carry out contract manufacturing activities. Among the private limited companies, approximately 95% companies are engaged in standalone manufacturing.

Branding

Pharmaceutical companies in the Mumbai cluster are not focused on branding, as only 38% companies own a brand. None of the proprietary-owned companies in the Mumbai cluster own a brand, as they are all engaged in contract manufacturing activities.

Among the respondent companies that own brands approximately 45% cater exclusively to the ayurveda segment.

Segment-wise classification

The survey reveals the various segments in which the pharmaceutical companies in the Mumbai cluster operate. Among these segments allopathy and ayurveda were the two prominent segments which were a part of the business operations of the respondent companies.

The companies in the cluster were engaged in manufacturing of varied product dosages forms, ranging from tablets, syrups to dry suspension, ointments injectables among others. Almost 47% companies were manufacturing medicines in tablet or capsules forms. Another, 37% respondents were into manufacturing of ointments/creams and other dry suspensions.

Operational analysis

Revenue classification

According to the survey results, 50% respondent companies in the Mumbai cluster recorded less than Rs 40 mn as revenue, whereas 17% companies were in the higher revenue bracket of Rs 500 mn to Rs 1 bn.

Among the respondents that earned less than Rs 40 mn in revenues, approximately 80% companies derived more than half of their revenue from the domestic market.

Share of exports in revenue

Exports form a substantial component of the revenues of the pharmaceutical companies that operate in the Mumbai cluster. According to the survey, exports constitute more than 50% of the revenues of 23% respondents companies that operate in the cluster.

Among the surveyed companies, 40% companies derive less than 25% revenue from exports followed by 37% companies which derive 25% to 50% revenue from exports. The other aspect to the exports was that 30% of the respondents were not exporting at all. These non exporting companies are into manufacturing of allopathy and ayurvedic products, with some companies manufacturing bulk drugs.

Country-wise exports

The major export destinations for the respondent SME’s in the Mumbai cluster were Europe, Americas, Middle East and Asia. Europe emerged as the most preferred export destination.

Production details

Production capacity utilisation

The pharmaceutical companies surveyed in the Mumbai cluster rank high on capacity utilisation, as 49% companies have a capacity utilisation of more than 75% followed by 48% companies that have a capacity utilisation between 50-75%.

Among the respondents with high capacity utilisation of more than 75%, approximately 80% companies operate with 1 plant each. Whereas approximately 58% companies operate with one plant among the respondents with capacity utilisation of less than 75%.

Research and development

According to the survey, 83% respondent companies in the Mumbai cluster have at least one R&D unit whereas around 11% companies have more than one R&D facility. The R&D spend of 52% companies is in the range of 2-5% whereas 38% companies operating in the cluster have a R&D spend of more than 5%.

IT adoption among SMEs

As per the survey, majority (90%) of the pharmaceutical companies in the Mumbai cluster use some sort of an IT product. While printers, desktop and scanners are the most commonly used hardware in the surveyed companies, high-end products such as notebooks, networking products etc are not very popular.

Among the various IT applications used by the respondents, payroll application is the most popular followed by receivables management applications.

Share of IT in total expenditure

Though most of the companies surveyed in the Mumbai cluster utilise some sort of an IT product, the share of IT in total expenditure is relatively low as 78% of the respondents have an IT budget of less than 1%. The survey also revealed that these respondents are not keen on increasing their spending on IT as approximately 95% of the companies with less than 1% expenditure on IT do not intend to increase their IT expenditure in the future.

Challenges in IT adoption

As per the survey, approximately 45% respondents indicated high cost of implementation as one of the challenges in IT adoption. Small size of business was also perceived as one of the challenges for IT adoption by almost 38% respondents.

Section C: Textile Industry

The Indian textile industry is one of the largest manufacturing sectors and contributes significantly to the economy in terms of industrial output, employment generation and export earnings. Apart from being highly-fragmented, the industry is characterised to be vertically-integrated across the whole value chain and interconnected with various operations. The industry has both the organised and unorganised segments. The organised textile segment consists of spinning mills and composite mills and the unorganised segment consists of handlooms, powerlooms and handicrafts among others. Cotton, blended, silk, wool and man-made textile are the major sub-segments of the textile industry. The textile players majorly deal in readymade garments, suiting and shirting, shirts and trousers, fabrics, bed linen and embroidery work.

Some highlights of the textile companies based in Mumbai are as follows:

Characteristics of the textile companies in the Mumbai cluster

Ownership pattern

Most textile companies surveyed in the Mumbai cluster are private limited companies that constitute 40% of the total sample, followed by partnership and proprietorship companies that account for 27% and 20% of the sample companies, respectively.

Year of incorporation

All the companies covered in the survey were incorporated during the period 1975-2005. Around 40% of these companies were incorporated between 1985 and 1995.

Registration

According to the survey results, approximately 57% textile companies in the Mumbai cluster are registered under the DIC/ SIDO and other state schemes.

Nature of operation

As per the survey results, around 63% of the companies surveyed were standalone manufacturers of textiles whereas 10% of the companies were contract manufacturers. The remaining 27% of the companies manufactured textiles on both standalone and contract basis.

Segment-wise classification

The textile industry is a large industry with many sub-segments, but for the purpose of this study, we have divided the industry into the following sub-segments: cotton, man-made fibre, blended fibre, wool, silk and jute.

As per the survey, cotton and man made fiber emerged as the most prominent segments in the industry.

Value chain

As per the survey, the respondent SMEs in the textile sector are involved in multiple value chain processes. Within the entire value chain, manufacturing of garments, along with other activities, was the most common activity among the companies in the Mumbai cluster.

Operational analysis

Revenue classification

Approximately 47% textile companies that took part in the survey had a turnover in the range of Rs 10-100 mn; besides, 26% companies have a turnover below Rs 10 mn and 17% companies have a turnover between Rs 100-250 mn.

Exports

As per the survey results, approximately 73% of the respondent companies in the Mumbai cluster were involved in some kind of export activity. Among them around 60% of the respondents marketed their products under a brand name.

Approximately 26% of the total companies surveyed derived over 50% of their revenues from exports. Among these companies around 62% companies were solely export oriented units and derived their 100% revenues from exports.

AS per the survey results, Europe and America were the most favoured export destinations for the textile companies in the Mumbai region, followed by the Middle East and Asia.

Production details

Capacity utilisation

Approximately 53% respondents covered in the survey had a capacity utilisation in the range of 80-90%. Among the remaining companies, around 30% had a capacity utilisation of over 90%.

Majority of the respondent companies (about 57%) worked in single shifts while among the remaining companies 30% companies worked in double shifts.

Source of raw materials

According to the survey around 42% respondents procured raw materials from within Maharashtra itself. Out of the remaining companies, 16% sourced materials from the overseas market.

IT adoption among SMEs

Majority of the respondent SMEs (76%) in the textile industry have implemented IT in their businesses. Desktops, printers and scanners are the most prominently used hardware, while customised software is the preferred option for all companies.

Share of IT in total expenditure

According to the survey results, 70% respondent SMEs in the textile industry spend less than 1% of their total expenditure on IT whereas the remaining 30% SMEs spend 1.0-2.5% of their total expenditure on IT. Approximately 70% of the surveyed companies do not plan to increase their IT spend over the next 2 years.

Challenges faced by companies in IT adoption

The survey reveals the various challenges encountered by the respondents while adopting IT in their business. Almost 38% of the respondents cited lack of funds as one of the challenges in IT adoption whereas approximately 34% of the respondents cited high cost of implementation as one of the challenges faced while adopting IT.