Budget 2017-18: Incentives For Small and Medium Enterprises

A number of measures revolving around government’s key schemes of Mudra, Start-up India, Make in India and Digital India have been announced. These relate to increasing access to capital, promoting domestic manufacturing and increasing tax compliance of small businesses.  Details are enumerated below.

Increasing access to capital

  • A Dairy Processing and Infrastructure Development Fund would be set up with a corpus of Rs. 8,000 crores.
  • Lending target under Mudra scheme has been doubled to Rs. 2.44 lakh crores in 2017-18 from Rs. 1.77 lakh crores.

Clean India/digital India- Incentives for filing taxes

  • The corporate income tax rate for companies with a turnover of less than Rs. 50 crores has been brought down to 25% from 30 % earlier.
  • Corporate income tax rate for companies with a turnover of less than 2 crores: Such companies are not required to maintain books and currently 8% of their turnover is assumed to be their profit and is liable for taxes. The presumptive rate of 8% has been reduced to 6 %, for turnover received by non-cash means (Sales receipt received through bank account or other digital means).
  • Start-ups: These benefits are available to start ups registered between April 2016 to April 2019, under start-up India scheme
  • The time period for availing 3 year income tax holiday[1] by a start-up has been extended to 7 years as against 5 years earlier, thus providing start-ups a longer window to claim the benefit.
  • Also, condition of original promoter holding 51% shares of voting rights for start ups for claiming the tax deduction against carry forward losses has been relaxed. As per the new condition, original owner only needs to continue to hold a stake in the start-up.

Make in India – Incentives for manufacturing in India

  • Renewable energy: Customs duty on a number of components that go into making solar power panels /modules has been reduced.
  • LED: Excise duty on components/fixtures of LED lights has been reduced.
  • Water purifiers: Customs duty for parts of RO membrane for household filters has been brought down to facilitate domestic manufacturing of RO membrane. The custom duty on import of RO membrane has been increased.
  • Devices for cashless transactions: Customs duty concessions have been announced for import of POS reader, micro ATMS, finger print reader, Iris scanner.

For detailed information on the changes in excise and customs duty, please click here to refer the Budget Sheet 2017-18.

Conclusion

Budget incentivises small businesses to manufacture locally and to pay their taxes. These are good steps as such and would help the industry in the long run.

How can we help you?

FineTrain is an advisory firm for small businesses. We help our clients grow their businesses. We can help you analyse new business opportunities or generate leads for your existing business.

Contact us

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800 888 4932

 

[1] As per start-up India scheme, the start-ups are eligible to claim 100 per cent income tax deduction under section 80- IAC, however they are liable to pay MAT (minimum alternate tax ,paid on book profits), which can be set off in later years

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Rise of B2B E-commerce: Opportunity For Small and Medium Enterprises

The competition among B2B ecommerce portals has been heating up with the entry of several new players who are looking to expand their presence across products and geographies. These portals are wooing small and medium enterprises to transact on their platforms with offers to support them with marketing, logistics and even credit. The rise of B2B ecommerce presents an interesting opportunity to SMEs who can leverage it to enter new markets and gain more insights on their customers.

Table 1: Leading Indian B2B e-commerce platformCapture

With the advent and increasing use of e commerce platforms, some of the issues faced by small businesses in selling online have eased, as these portals provide much needed marketing and logistics support. SMEs  can harness the power e-commerce opportunity through the following strategies.Small businesses find it difficult to sell online as the competitive landscape for selling goods online is very different from offline market place, where the sale is relationship based and competition is mostly local.  As such, to sell online, the product should be searchable, able to compete with local as well as national products and should be delivered in a timely and efficient manner.

 Key strategies for Small and Medium Enterprises

 Document the sale process

Since sale of industrial machinery part is a consultative process, a SME owner typically spends most of his/her time consulting with the clients to customise machinery to client’s requirements. For example, a ghee machine supplier needs to understand the manufacturing process (manual or automated), raw material (milk, cream or butter), and capacity and cold storage facilities of the client before designing the machine.

SMEs  need to document the sales consultation process in detail, which can then be used to design automated systems that can accommodate different buyer requirements and provide ballpark pricing.

Enable product comparison

In order to differentiate itself among a number of products available online, the SMEs need to provide detailed information on the product quality, raw material, manufacturing process and testing infrastructure available with the company. For example, the quality of a plastic product would depend the manufacturing process (injection moulding machine, extrusion machine or a hand layup process), polymer used and quality control measures adopted by the manufacturer.  Precise product description and comparison would also reduce product return, a major pain point for small businesses.

Segment your market

SMEs  must ensure that ecommerce doesn’t cannibalize their sales from existing sales channels (sales representatives and distributor channels). Therefore it’s important to segment the products into different categories depending on the business size, complexity of the product, buying cycle, discounts offered, geography, demography etc.  Thereafter, the portfolio could be clearly demarcated into segments that would be sold through both the e-commerce and traditional platforms/channels.

There is no better time to start selling industrial goods online. Small businesses should have a strategy in place to select the products to be sold through e commerce route, build capacity to meet the requirements of new customers and to choose the right ecommerce platform.

How can we help you?

FineTrain is a consulting firm for entrepreneurs, we help our clients grow their businesses. We can assist you in getting your business ready for e commerce and in planning your ecommerce strategy.

Contact us

bchhatre@finetrain.com

800 888 4932

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Business opportunity: Flexible Packaging

Flexible packaging refers to packaging that can take various shapes and forms. Most commonly used flexible packaging products include chips packets, milk packets, shampoo and medicine sachets and different types of pouches.

Flexible packaging is a large industry world over, with a size of over $ 200 bn[1]. The Indian market contributes over $ 5 bn and is growing in double digits. The key end user industries are food products, beverages, personal products and pharmaceuticals (see pic-1).

Picture 1: Indian Flexible Packaging Market

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  1. * Others includes pharmaceuticals.
  2. Source: Investor presentation of Uflex

 What is the Technology?

The technology related innovations in flexible packaging industry have focused on increasing the shelf life and safety of the packaged product and protecting it from counterfeiting.

Flexible packaging is made of layers of polymers (LDPE, BOPP, BOPET, CPP), aluminium foil, paper and other material. The topmost layer (most commonly BOPP or BOPET) is printed. The printed layer is laminated along with other packaging material, and then slit into different sheets. These sheets are converted into different forms as per the client requirements. The choice of material depends on the end use; for example in food applications where the shelf life has to be extended, different types of polyethylene and poly propylene films are used.

The printing technology varies depending on the material to be printed, and has been explained in the figure below.

Picture 2: Printing technology

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How is the Competitive Landscape?

The industry has two types of players, large players who manufacture packaging films as well as packaging products and SMES who mostly purchase the films and convert it into packaging products. Further, some of the SMEs are manufacturers of machinery or inks.

Table 1: Flexible packaging-competitive landscape

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What are the Prerequisites to start a Flexible Packaging Industry?

The must haves would include a strong technical team that can meet client’s quality expectations, create innovative products and minimize wastage.  Other requirements include land/area (minimum 5000 sqft for Rotogravure printing) and a budget of Rs. 5 crs upwards.

How can we help you?

We can help you start a flexible packaging business through a number of services including business viability assessment, market landscaping and expert consultation.

Reach us:

bchhatre@finetrain.com

Phone:800 888 4932

 

[1] Source for international and domestic market size is Uflex investor presentation -November 2016

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Business Opportunity – Dairy Products

The Indian dairy industry[1] estimated to be Rs 80,000 Crores and is growing at a compounded annual growth rate of 7%. The growing demand for milk and milk based products is also reflected in increasing per capital availability of milk, which has grown from 225 gms/ day in the year 2007 to 307 gms/day in the year 2015 [2]

Opportunities for small enterprises:
Overview:

The sector can be broadly be divided into two categories, packaged liquid milk and milk based value added products (see below)

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On the other hand, value added products such as flavoured milk, cheese, ghee etc offer an attractive opportunity for small enterprises as they can be started with relatively lower capital (Rs. 50 lakh onwards) and have higher profitability vis a vis packaged milk.The packaged liquid milk segment is mostly dominated by large dairies such as Amul, Heritage, Vijaya, etc. as it requires access to large number of dairy farmers, infrastructure to transport milk and sizable distribution network.

Opportunities:

Flavoured milk:Flavoured milk is one of the fastest growing dairy sectors in the market, because of its popularity among children and teenagers. The milk comes in various flavours such as chocolate and fruits, thus combining goodness of milk with taste. Flavoured milk market size in the year 2015 was at Rs. 2,466 crores and it is expected to grow at CAGR 28 percent.

Organic milk: Organic milk comes from cows that have been grazed on pasture that has no chemical fertilisers, pesticides or agrochemicals.   Increasing awareness about consumption of chemicals and pesticides through milk is contributing to the demand for organic milk.

Though being at a very nascent stage, this sector has seen some action recently with the entry of number of dairy farms in Pune and Mumbai focussing exclusively on organic milk. Further, established dairies such as Parag Dairy have also entered this segment with their brand “Pride of Cows”.

Value added dairy products: Nearly 55% of the milk produced in India is used for manufacturing value added dairy products[3]. More details on value added products are available in the table below.[i]

  capture3

How can we help?

We can help you start a dairy based business or expand your existing dairy related business through a number of services including business viability assessment, market landscaping and expert consultation.

Reach Us:

bchhatre@finetrain.com

Phone:800 888 4932

 

[1]  As per the report by Alvarez and Marsal (https://www.alvarezandmarsal.com/) The branded market for dairy products is estimated to be Rs. 80,000 crores. The data for the market size of value added products has also been sourced from the same report.

[2] NDDB.co.in

[i] Report by Alvarez and Marsal

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Stand up India Scheme- Boosting Entrepreneurship Among Women

The ‘Stand up India Scheme’, launched in April 2016, facilitates bank loans to Scheduled Caste/Scheduled Tribe and Women Entrepreneurs for  starting new ventures in manufacturing, services or trading sectors. The scheme mandates all branches of scheduled commercial banks[1] in India to lend to at least one woman and one SC/ST entrepreneur.

Key features:CaptureHow FineTrain Can Help:

If you are thinking about a new venture, now is the time to start. FineTrain can assist you in identifying locally available opportunities that can be converted into viable businesses. We can help you with:

  • Comprehensive, real-time information on local opportunities
  • Assessing viability of specific opportunity
  • Facilitating connections to sector experts and/or professionals who can help you in implementing your plans

Contact:

Write to us: bchhatre@finetrain.com

Call us: 800 888 4932

Visit us: www.finetrain.com

[1] Scheduled commercial banks are those banks which are included in the 2nd schedule of the RBI Act, 1934, these include both public sector and private sector banks. Currently there are 71 scheduled commercial banks. You can get a list of these banks on //www.bcsbi.org.in/LOM_ScheduledCommercial.html

[2] MCLR is the base rate of bank for a particular tenor of loan, for example In July 2016, SBI’s MCLR for one month tenor loan and 3 year tenor loan was 9 per cent and 9.30 per cent respectively.

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Business opportunities in Telangana

The State of Telangana is the 12th largest economy with a GSDP of around Rs. 4.68 lakh crores[1] and a growth rate of 9.2% during 2015-16. Telangana includes 10 districts, with its capital in Hyderabad. Telangana is land locked with its neighbouring States of AP, Maharashtra and Madhya Pradesh.

Telangana is home to large industries in IT/ITES, pharma, engineering goods and defence. The industrial activity is currently concentrated in Hyderabad, Ranga Reddy and Medak Districts, these three districts contribute to almost 50 per cent of the State GDP. Medak and Ranga Reddy are also the fastest growing districts.

The opportunities in Telangana can be broadly divided into a few sectors; agro based industries, textiles, chemicals, engineering, and pharmaceuticals. The district wise opportunities are described below.

Business profile of districts of Telangana

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 19

Upcoming opportunities

Small enterprises can become a part of the vendor network /ancillary to the large industries that are planned in and around Telangana. The figure below describes the projects across various industries that are currently being planned. These include a number of bulk drugs intermediate and API (Active Pharmaceutical Ingredient) units,   food park by ITC, an LED bulb unit by Syska labs, Soft drink bottling plant by Hindustan Coca-Cola Beverages Pvt Ltd, and Mobile handset manufacturing facility by Micromax informatics Ltd.   A detailed list of upcoming projects is available upon request.

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Source : Projects Today

How can we help

  • FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and assistance in obtaining project funding.
  • We can help you assess your market, identify technology and raw material providers, estimate the capital requirements, time to break even and recommend ways to expand your business.

Reach us:

Call us @ 800 888 4932,

Write to us- bchhatre@finetrain.com

[1] Source: GSDP at constant prices, Socio Economic Outlook, Telagana, 2016

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How to decide if you should stay put in your business

You have built a successful business and are looking for growth opportunities.  You can either invest in your existing business or consider new ventures. The following five parameters may help you decide if your business is attractive enough for you to put in additional resources.

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Market size:  If you want to grow fast, the market has to be big enough for you to sell your goods to large volume of customers.  Sometimes, you may discover that your market is too small to be worth pursuing.

Say you are providing an online platform to hire domestic help in a particular city. The city has 10 lakh households, of which 10% or 1 lakh households are your target customers. If you can convert 10% of that eventually, you can get 10,000 customers.  Assuming you earn a commission of Rs. 1000 per customer, your revenue could be at best Rs.1 crore and profit perhaps 10 lakh.  That may be too small, but if you are able to replicate the same model in other cities, the business may be worth pursuing.

Customer acquisition cost and customer life time value: Customer acquisition cost refers to costs incurred in obtaining new clients. These include salaries of marketing staff, advertising spend and discounts offered.

Say, to attract 1000 customers, you spend Rs. 50,000 in advertising, deploy one sales manager at a monthly salary of Rs. 30,000 and offer discounts worth Rs. 10,000. Your customer acquisition expense then is 90,000 or Rs. 900 per customer.  Your revenue per customer should be at least 4-5 times the acquisition cost for your business to be profitable. However, revenue can be spread over 5-10 years of your engagement with the customers and need not be from just one transaction. So, the more repeat customers you have, the customer life time value would be higher and so would be your profitability.

Fixed versus variable costs: Businesses have two types of costs: fixed costs and variable costs. While fixed costs such as rents, salaries, and interest do not change with the increase or decrease in sales volumes, variable costs such as raw material, transport charges vary with the number of units produced or sold.

Higher fixed costs implies that it would take you a long time before you can start making profits, but profits would grow sharply once you achieve critical mass (breakeven point).

Get to know your fixed and variable costs and breakeven point. If you have already achieved the critical mass, it’s time to stay put and enjoy better profitability.

Operating profits: Refers to profits that remain after meeting all operating costs (i.e., all above mentioned costs except interest, depreciation). If your operating profitability is declining, you would need to conduct a thorough diagnostic assessment of your business.

Return on capital employed: Operating profit alone is not enough; return has to be analysed in the context of the capital that is deployed in your business.  For instance, if your average annual operating profit is around Rs. 25 lakh and the total capital deployed in the business is Rs. 5 crore, then your return on the capital is only 5%. This kind of return can also be generated by simply putting your money in a fixed deposit.

How can we help?

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and business diagnostics. We can help you assess your market, determine customer acquisition and lifetime value costs, your operating profits and return on capital, and recommend ways to improve profitability or expand your business.

You Can Reach us:

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Write to us- bchhatre@finetrain.com

Visit us- www.finetrain.com

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source: livemint.com

Business opportunity: Waste Management

Indian cities are crumbling under waste, India generates almost 130 million tonnes of waste per day of which only 12 % is being processed and treated[1].

Hence, lies the opportunity for entrants in waste management services, where the service provider can tie up with the waste generators to manage their waste by treating/processing it on site. This opportunity exists in number of sectors including food waste, poultry waste, agri waste, and dairy farm waste. This blog focuses on managing food waste.

What is the opportunity? 

The business opportunity is to offer waste management services to the large food waste generators, such as hotels, big institutions with canteen facility, hospitals, and engineering colleges by setting up a biogas plant in their premises. The kitchen waste can be converted to either biogas or electricity, which can be consumed by the user.

This service would also be useful to large apartment complexes (with 1000 flats or more) and schools that offer meal to their students.

As can be seen below, biogas plant is an attractive investment for its buyer, he can recover his investment in four years.
Further, the use is entitled to a subsidy[2] of Rs. 40,000 per KWH of power generated or 40% of the project cost. After accounting for subsidy, the payback period would only be three years.

Captureb

How does one start biogas plant manufacturing unit

In order to offer Biogas plant fabrication service, one needs to have detailed understanding of the processes involved in manufacturing, selling, installing and operating of the Bio-gas plant. There are Biogas Development & Training Centres set up by respective state governments, which impart training in operations of biogas plant.

Typically, most of the companies who are in the business have at least one member who is a micro-biologist/ bio-technologist with a bachelor’s or master’s degree.

The capital requirements are not large, as it is a skill intensive business. One does not need to set up a manufacturing unit, the plant is typically fabricated at the client site and client pays up to 50 per cent of the price in advance.  The cost of fabrication of a (up to 2 tonne per day) plant usually is less than15 lakhs. Assuming that one starts with one order, the capital required for setting up this business would be within 20 lakhs.

Challenges

  • Waste management is a new concept in India, and people are not used to paying to manage their waste. It can take several meetings/follow ups to convince a customer about utility of investing in waste management. However this issue will be eased with stricter environment laws going forward.

 

  • The waste for the plant needs to be homogeneous, requiring the waste to be segregated into organic and inorganic waste at source. The segregation of waste can be challenging for a housing apartment complex, where residents are not used to segregating their waste.

 

  • The biogas produced in the plant has to be used the very same day as transporting and bottling it is not viable. Hence, biogas as a cooking option is feasible only for institutions that have one large kitchen (hotel/ hospitals) and not apartment complexes.

 

 How can we help?

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and business diagnostics – we can help you in understand the market, competitive landscape, subsidies and government schemes available for waste management opportunities. We also offer support in executing your ideas by connecting you with sector experts and professionals.

 

Call us @ 800 888 4932,

Write to us- bchhatre@finetrain.com

Visit us- www.finetrain.com

[1] Source: Status report (2001-13)Pollution control board.

[2] The subsidy is available only for plants which convert the gas into electricity and the calculation is based on the KWH of the electricity generated. The subsidy is calculated as Rs 40,000 / KWH (kilo watt hour) or the 40% of the total cost of plant construction whichever is less.

[3]Picture Source: Livemint.com

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Business Opportunity in Andhra Pradesh: Aquaculture and allied industries

Aquaculture:

Aquaculture refers to commercial farming of seafood such as fish, prawns and crabs. The produce is either sold fresh or in processed form in domestic and export market.  Aqua animals found in India can be divided into two categories: marine animals such as shrimps and crabs and inland fresh water fish including Rohu, Catla, Mrigala, Grass Carp.

The current Indian market[1] for sea food is estimated to be 10.07 million tonnes, valued at over INR 1 lakh crore, growing at a compounded annual growth rate (CAGR) of 5% in volume. The processed fish segment (although only 12% of the total market now) is growing at a CAGR of 10% in terms of volume and over 25% in terms of value.

The growth of the aqua industry has spurred the growth of a large number of supporting industries such as manufacturing fish feed and equipment/products for catching and processing fish.

Why Andhra Pradesh?

Andhra Pradesh is the largest producer and exporter of seafood (see Table 1) in the country.  Aquaculture is an attractive opportunity in coastal regions of Andhra Pradesh such as Srikakulam, Vizianagaram,Visakhapatnam, Krishna, Guntur, Prakasam, Nellore and East and West Godavari.

Table 1: Major fish producing states in India (2014-2015) 

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Source: National Fisheries Development Board

What are the Opportunities offered by allied industries?

These include opportunities related to manufacturing products and equipment used in farming and processing of sea animals.

 

Table 2: Aqua culture and allied industries

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What is the Government support available to this industry?

There are a number of incentives available to entrepreneurs in this sector, including schemes from National Fisheries Development Board (NFDB), Department of Fisheries (Andhra Pradesh) and Department of industries (Andhra Pradesh). These are of two forms:

  1. Farmers are given subsidy to purchase equipment such as Aerators that mechanize the farming
  2. Entrepreneurs are offered incentives to set up manufacturing facilities/processing facilities. For example, as part of Fisheries Policy of Andhra Pradesh, entrepreneurs are offered interest subvention/subsidy of 6% on the loan taken for setting up the unit for ice processing plants and feed manufacturing units.

For more information on these subsidy schemes, please click this links:

http://www.ap.gov.in/wp-content/uploads/2015/12/31102015AHF_MS30.pdf

http://nfdb.gov.in/pdf/GL.pdf

How can we help?

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, business feasibility studies and business diagnostics – we can help you in understanding the feasibility and viability of aquaculture and related opportunities and suitable government schemes. We also offer support in executing your ideas by connecting you with sector experts and professionals.

Call us @ 800 888 4932,

Write to us- bchhatre@finetrain.com

Visit us- www.finetrain.com

[1]  Market size has been estimated  by assuming production at 10.9 million tonnes  (as per data from National Fisheries Development Board)  and a price of 100 INR per kg

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Business Opportunity: Function Hall

Function or Banquet halls provide space and other services such as decorations, food and drink for a party, ceremony, get-together, corporate retreat etc. Function halls typically provide only the space, furniture and cooking facilities. Guests hire the cook separately to make arrangements for food. Banquet halls typically are owned and managed by restaurants, hotels, and they have in-house catering facilities and staff.

What drives the demand for these facilities?
Demand is influenced by the type of event/occasion to be celebrated. Typically, these facilities are availed predominantly by people for celebrating marriages that are typically 2-3 day affairs. However, over the past decade, demand for short duration events such as get-togethers, birthday parties, corporate meetings and sports events has increased as well, owing to greater disposable income and the large demographic dividend. Our primary and secondary research indicates that demand drivers are changing as follows:

1. Demand for these facilities is on the upswing: Increasingly these facilities are being availed by customers of smaller and shorter duration events such as birthday parties, anniversaries, family/class reunions and get-togethers. Corporates/government agencies and educational institutions have also started availing these facilities for organizing events such as office retreats, outbound/annual events, award ceremonies, small conferences/workshops/seminars. Of late, demand for facilities where soccer, badminton and soft sports can be played is also increasing.

2. Distance to the facility is not a big differentiator: Customers are willing to travel some distance if the quality of the facilities are perceived to be good. In fact, people increasingly want a hall away from the hustle and bustle of the city, especially for corporate events, get-together and sports events.

3. Price is not a overriding factor in selection: Customers are willing to pay more for better amenities, including more amenities for children, comfortable interiors etc.

                                Capture

Opportunities for new entrants:
Overall, customers are looking for a venue which could be a one-stop destination for different events. As such, key things to be kept in mind by new entrants for differentiating themselves are:

Incorporating innovative features: Customers are looking for such as theme based architecture, special play area of children, comfortable interiors, music systems and license to play music, in house photography, projectors and screens to display pictures. In addition, customers are also interested in venues that can incorporate soft sports such as badminton, soccer, tennis etc as well.

Focusing on quality of service: Customers want hassle free, one stop services. Venue providers could differentiate themselves by offering services such as pick up/drop facility from nearest station/airport and props for photography/selfie sticks.

Food remains the most important aspect: This is true of any event and understanding preferences and allowing customers to tinker with the menu would go a long way in ensuring loyalty.

Enhanced marketing: Currently, most of these facilities gain customers largely through referrals and paid listing in local directories. Building digital presence, allowing a virtual tours of the facility, posting availability for the next few months, online bookings either directly or through portals that facilitate bookings, and perhaps offering reward points for customer referrals can also enhance bookings.

How we can help?

FineTrain enables entrepreneurs to assess and understand new business opportunities. Our services include market research, and business feasibility studies. We also offer support in implementing your idea by connecting you with professionals who offer project execution support. We can help you assess feasibility of setting up a new event facility in your city, understand customer preferences, analyze the capital requirements, profitability and time to breakeven.

Reach us at:
admin@finetrain.com,
bchhatre@finetrain.com

800 888 4932