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Overview of Cluster Financing

This section of the publication is an analysis of primary data collected through a survey to understand the mode of finance and fund requirements of auto components and electronic goods companies operating in the industrial belt of Pune.

The survey attempted to bring to the fore the extent of difficulty that companies faced while availing loans and it was revealed that while around 70% SMEs felt loan availability was moderately difficult, 16% felt that it was easy. Further, banks were found to be the primary source of credit for SMEs. Not so surprisingly, nationalised banks were found to be the most preferred choice in terms of sources of funds — 76% of the surveyed companies chose to go to nationalised banks and 16% companies chose to go to private banks for their finance needs. Moreover, 90% of the companies were satisfied with the services provided by their existing banks.

The survey revealed further that in the last 3 years, 37% SMEs from the auto components and electronic goods sectors in Pune cluster availed loans. During these years, SMEs availed loans mostly for meeting their working capital requirements and for purchasing machineries. In the coming 3 years, however, only 27% SMEs plan to take loans and majority of the surveyed companies plan to seek loans for meeting their working capital requirements, for purchasing machinery, for business expansion and for purchasing raw materials.

Section A: Auto Component Industry

According to the survey results, majority of auto components SMEs operating in Pune depend on bank finance and public sector banks have an edge over private players with respect to SME lending. The popularity of nationalised banks is evident from the fact that 53% of the surveyed companies find PSUs and nationalised banks to be a convenient source to meet their credit needs. Further, 87% companies seem to be satisfied with the services offered by their respective banks.

Credit requirements

Only 33% of the surveyed companies in the auto components sector availed loans in the last 3 years and out of these, most companies sought loans for meeting working capital requirements, purchase of raw materials and machinery. Surprisingly, a substantial number (67%) of companies had not availed any loan in the last 3 years.

In the coming 3 years, only 40% of the surveyed companies plan to avail loans and most companies plan to seek credit to meet working capital requirements and to purchase raw materials.

Obstacles in credit

High interest rates and access to long-term loans top the list of obstacles faced by the auto component companies in the cluster during loan procurement.

Section B: Electronic Goods Industry

Availability of funds

Among the electronic goods companies surveyed in this cluster, approximately 80% admitted to have faced moderate difficulty in obtaining finance from different sources for their business activities. Also, these companies preferred to obtain finance from PSU banks, as 80% of the companies obtained finance from this source and 93% of the surveyed companies were fully-satisfied with the services and products provided by their existing banks.

Further, electronic goods SMEs by and large abstained from obtaining funds from venture capital funds, private money lenders, and private equity funds for their business purposes, according to the survey results.

Credit requirement

Only 40% of the surveyed companies were found to have taken loans in the last 3 years and most companies had taken loans to meet their working capital requirements and purchase of machinery, revealed the survey.

Credit obstacles

High interest rate tops the list of obstacles faced by the electronic goods during loan procurement.