1. Management of Finance in MSE
K V Ramesh
Asst.Professor (Finance)
IPE

2. What is MSE? Micro and Small Enterprises
Micro, Small & Medium Enterprises Development (MSMED) Act, 2006
Manufacturing Enterprises and Service Enterprises

3. TWO classes
The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951).
The Manufacturing Enterprises are defined in terms of investment in Plant & Machinery.
The enterprises engaged in providing or rendering of services.
Service Enterprises defined in terms of investment in equipment.

4. Manufacturing Sector Enterprises Investment in plant & machinery Micro
 Does not exceed Rs.25 lakhs.
  Small
 More than Rs.25 lakhs but does not exceed five crore rupees
  Medium
 More than Rs.5 crores but does not exceed ten crore rupees

5. Service Sector Enterprises
 Investment in equipments*original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered
Micro
 Does not exceed Rs 10 lakhs.
 Small
 More than Rs.10 lakhs but does not exceed two crore rupees
  Medium
 More than Rs.2 crore but does not exceed five core rupees

7. What is Finance ?
Finance stands for provision of money as and when required.
Process of raising, providing and administering all money/funds to be used in a corporate enterprise.
Is concerned with the acquisition and conservation of capital funds in meeting the financial need and overall objectives of business enterprise.

8. Funding & Finance Policy of fiscal support Policy of priority credit
Equity

9. Growth
MSMEs has shown constant growth rate of more than 10% every year from 2007 till , whereas in year growth rate was 19% which is approximately twice of the Growth rate recorded for previous years.
1.74 lakh to 2.82 lakh

10. much-needed avenue
Thejo Engineering - the first company to get listed in NSE's Emerge segment. SME exchange
Sept.18th ,2012.
Sept.6th, –Rs.430

11. PSl
Priority sector lending include only those sectors as part of the priority sector, that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and tiny and small enterprises.

12. Targets
The domestic commercial banks are expected to enlarge credit to priority sector and ensure that priority sector advances (which include the micro and small enterprises sector) constitute 40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

13. Banks must cater
40 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises having investment in plant and machinery up to Rs. 5 lakh and micro (service) enterprises having investment in equipment up to Rs. 2 lakh
20 per cent of the total advances to MSE sector should go to micro (manufacturing) enterprises with investment in plant and machinery above Rs. 5 lakh and up to Rs. 25 lakh, and micro (service) enterprises with investment in equipment above Rs. 2 lakh and up to Rs. 10 lakh. Thus, 60 per cent of MSE advances should go to the micro enterprises.
  While banks are advised to achieve the 60% target as above, the allocation of 60% of the MSE advances to the micro enterprises is to be achieved in stages viz. 50% in the year , 55% in the year and 60% in the year

14. working capital
As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5crore.
A composite loan limit of Rs.1crore can be sanctioned by banks to enable the MSME entrepreneurs to avail of their working capital and term loan requirement through Single Window in terms of Master Circular on lending to the MSME sector.

15. 17 th Oct,2012
Bank loans to Micro and Small Enterprises (MSE) engaged in providing or rendering of services will be eligible for classification as direct finance to MSE Sector under priority sector upto an aggregate loan limit of Rs.2 crore per borrower/unit, provided they satisfy the investment criteria for equipment as defined under MSMED Act, 2006.

16. Cluster financing
approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognized MSE clusters.
approach may be more beneficial
(a) in dealing with well-defined and recognized groups
(b) availability of appropriate information for risk assessment
(c) monitoring by the lending institutions and
(d) reduction in costs.

17. List of clusters
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
Micro and Small Enterprises Cluster Development Programme (MSE-CDP)
located in 121 Minority Concentration Districts.
Credit Guarantee Fund Trust for Micro and Small Enterprises ( CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals/ third party guarantees

18. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of a MSE unit, which availed collateral- free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 per cent of the outstanding amount in default.
The CGTMSE would provide cover for credit facility up to Rs. 100 lakh which have been extended by lending institutions without any collateral security and /or third party guarantees. A guarantee and annual service fee is charged by the CGTMSE to avail of the guarantee cover.
Presently the guarantee fee and annual service charges are to be borne by the borrower.

19. Important concepts in BEP Analysis
Contribution
Profit volume ratio ( P/V ratio)
Break even point
Margin of safety
Angle of incidence

20. Additional Disclosures
item No.
Disclosures required under the Micro, Small & Medium Development Act, 2006 I
Delayed payments due as at the end of each accounting year on account of Principal and Interest due – Rs. II
Total interest paid on all delayed payments during year -Rs.
III
Interest due on principal amounts paid beyond the due date during the year but without the interest amounts RS IV
Interest accrued but not due– Rs, XXX (interest accrued as at the end of the year but not due as interest is computed at monthly rests from the due date) V
Total Interest Due but not paid – Rs. XXX (all interest amounts remaining due together with that from prior year(s) until such date when the interest was actually paid to the small enterprises. Mainly to ascertain the amount of interest disallowable for income tax purposes)

21. Schedule VI (a) Share capital (b) Reserves and surplus
A EQUITY AND LIABILITIES
1 Shareholders’ funds
(a) Share capital
(b) Reserves and surplus
(c) Money received against share warrants
2 Share application money pending allotment
3 Non-current liabilities
(a) Long-term borrowings
(b) Deferred tax liabilities (net)
(c) Other long-term liabilities
(d) Long-term provisions
4 Current liabilities
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions

22. B ASSETS (i) Tangible assets (ii) Intangible assets
Non-current assets
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(iv) Intangible assets under development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets
2 Current assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other current assets
TOTAL

23. Profit and Loss Statement
Particulars Note No. Figures current/ previous reporting period
I Revenue from operations
II Other Income
III Total Revenue (I + II)
IV Expenses:
Cost of Material consumed
Purchases of Stock in trade
Changes in Inventories of Finished goods , Work in progress and stock in trade
Employee Benefits expense
Finance costs
Depreciation and amortisation expenses ,Other expenses
Total Expenses

24. V Profit before exceptional and extraordinary items and tax (III - IV)
VI Exceptional items
VII Profit before extraordinary items and tax (V - VI)
VIII Extraordinary items
IX Profit before tax (VII - VIII)
X Tax expense:
(1) Current tax
(2) Deferred tax
XI Profit (loss) for the period from continuing operations (VII - VIII)

25. XII Profit (loss) from discontinuing operations
XIII Tax expense of discontinuing operations
XIV Profit/(loss) from discontinuing operations (after tax) (XII - XIII)
XV Profit (Loss) for the period (XI + XIV)
XVI Earnings per Equity Share:
1) Basic
2) Diluted