A fourth of Indian micro, small and medium enterprises have lost 3 per cent or more of their market share to big corporations during the Covid epidemic, a report said on Monday.
The research wing of Crisil examined 69 sectors and 147 clusters with a revenue of Rs 47 lakh crore or a fourth of India's GDP to find out how the small businesses fared in the pandemic.
The report said that more than a quarter of India's Micro, Small and Medium Enterprises MSMEs lost market share of over 3 per cent due to the Covid 19 epidemic.
Half of these companies that saw a loss of market share saw a contraction in their operating profit.
The impact of the pandemic on the smaller businesses has been a subject of interest because of their vulnerability due to size.
The SME pie could be eat up a huge chunk because large ones leveraged their global presence to procure raw materials, its director Pushan Sharma said.
Sharma said supply chain disruptions impacted small pesticides manufacturers more, while edible oil SMEs Small and Medium Enterprises lost market share due to an increase in hygiene quotient as the pandemic resulted in less buyers for oil sold in loose.
Pesticide SMEs and edible oil SMEs suffered margin contraction of 1 per cent and 2 per cent, due to partial pass-through of the increase in raw material costs, which jumped by 60 per cent, Sharma said.
MSMEs in 'essential' segments like pharmaceutical agricultural millers lost almost all of their market share, it said.
It said that tobacco units gained market share as companies in sectors like steel pig iron gained market share where only SMEs could capitalise on the revival of infrastructure demand.
Transport operators, edible oil, gems and jewellery are most vulnerable to operating profit losses due to a thin margin of less than 3 per cent and a limited input cost pass-through of under 60 per cent, according to the report.
Sectors like textiles and pharmaceuticals have offered a ray of hope for exports after the pandemic and ongoing geopolitical crisis. Its associate director Elizabeth Master said cotton yarn exports have benefited from the US's ban on Xinjiang, China-made items, apart from the China 1 policy.
The industry's operating profit margins are expected to be close to the pre-pandemic level this fiscal, but MSMEs in more than half of the sectors will buck the trend. The performance is underwhelming in the context of overall corporate India, which is expected to register a 10 -- 14 per cent increase in revenue and operating profit margin of 19 -- 20 per cent, the report said.