96% of MSMEs Expect Profits to Rise in 2023, Says NeoGrowth’s MSME Business Confidence Study

• 3 out of 4 MSME owners confident of India's economic growth in 2023
• 75% MSMEs expect consumer demand to surge
• 71% MSME owners plan to include sustainable business practices
• 60% MSME owners plan to step up Technology/Digital Investments in 2023
• Chennai outperforms other cities in business optimism parameters

Ninety-six per cent of MSMEs expect profits to increase in 2023, an MSME Business Confidence Study released today by NeoGrowth, an MSME-focused digital lender in India, indicates.

The MSME Business Confidence Study was conducted nationwide with responses from close to 3,000 MSME owners. The study covered the expectations of India's MSME owners across 25+ cities and 70+ business segments, as they step into 2023 amidst global volatility.

Arun Nayyar, Managing Director and CEO, NeoGrowth, said, “It is heartening that MSMEs are confident about their growth, profitability and other business indicator. We believe that the strong digital ecosystem in India will be a catalyst for MSME lending in the coming year. MSMEs are capitalising on new credit options to build and scale their businesses easily, unimpeded by traditional methods of credit underwriting. 2023 will be a crucial year for MSMEs, which will play a pivotal role as India moves a step closer to realising its vision of a $5-trillion economy.”

Sentiment of optimism among MSMEs

The optimism among MSMEs, India's economic backbone, is an encouraging sign in these uncertain times. Three out of four MSMEs, who were a part of the study, were confident of economic growth in 2023, 20% were neutral and only 5% were negative. Among the respondents, 80% of women MSMEs from the manufacturing and services sector said they were optimistic about India's economic growth.

MSME consumer demand

Seventy-five percent of MSME owners expected an increase in consumer demand in 2023, 21% of MSME owners felt it would remain the same and only 4% of MSME owners anticipated that it would decrease. MSMEs from Chennai recorded the highest optimism with around 86% expecting growth, followed by 83% in Hyderabad and 81% in Mumbai.

In terms of industry segment, MSME owners in the retail and trading segment said they were positive about witnessing a strong consumer demand in 2023. Women-led MSMEs from the trading and wholesale industry anticipated a healthy consumer demand in the coming year compared to other respondents.

Expectations for business profitability

Ninety-six percent of MSMEs expected their profits to increase in 2023; out of these, 66% anticipated profits to rise by over 30%, while 30% of MSMEs felt that it would increase by less than 30%. Only 4% of MSMEs expected business profitability to decrease.

MSMEs in Chennai were most confident about profitability in 2023 with 80% expecting an over 30% increase in profits. In contrast, the profit expectations of MSME owners in Mumbai and Pune were more conservative.

Non-metro MSME credit demand

Eighty-four percent of MSMEs in non-metros, largely bucketed under ‘others’ in the study, said they planned to opt for business loans in 2023. The accelerated demand for credit from smaller cities signalled MSMEs’ business recovery, as they require funds for their working capital needs, growth and expansion.

The manufacturing and services industry segments anticipated higher credit demand. Over 80% of women MSME owners expected to opt for a business loan in 2023. Given the expectations of a strong consumer demand, the repo rate increase by 225 basis points since early 2022 was unlikely to impact the MSME credit demand in 2023.

Openness to digital adoption

Sixty percent of MSME owners said they planned to step up technology or digital investments in 2023. The willingness for digital adoption was clearly evident with 38% of MSMEs saying they would focus on online selling, 23% planning to build a social media presence, and 24% of MSMEs desiring to digitise their accounts and payments to track cash flows in 2023.

Employment generation

Sixty-one percent MSME owners said they intended to expand their workforce in 2023 with higher hiring expected in the services and manufacturing industry segments. Three out of four Chennai-based MSMEs planned to hire more employees in 2023, the highest in the country.

Focus on sustainability

Seventy-one percent of MSME owners hoped to include Sustainable Business Practices in 2023. The topmost sustainable business practice favoured by MSMEs was to eliminate plastic usage. Sustainable business practices include initiatives around energy conservation/ renewable energy, tree plantation, reducing carbon emissions, reducing plastic and paper usage & controlling/ reducing air/ water pollution

Report: https://www.neogrowth.in/neoinsights/

About NeoGrowth:

NeoGrowth was founded by Dhruv Khaitan and Piyush Khaitan a decade ago. NeoGrowth is a new-age lender, with a focus on Micro, Small, and Medium Enterprises (MSMEs). It is a Systemically Important, Non-Deposit taking Non- Banking Financial Company (NBFC-ND-SI), offering a wide range of products tailored to the dynamic needs of small businesses. Its data science and technology-led approach enable it to offer quick and hassle-free loans to MSMEs across 70+ segments across 25+ locations in India. NeoGrowth offers a unique daily repayment option to its customers with multi-channel repayment modes. It has served and engaged with 1,50,000+ businesses and supported them with their growth ambitions. It not only helps small businesses grow but also drives financial inclusion making a positive social impact.

Founded by industry veterans, its Board of Directors comprises experts, who guide the leadership team toward its strategic goals. NeoGrowth is also backed by renowned investors, namely Omidyar Network, Lightrock, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund, WestBridge, FMO, and Leapfrog Investments.

For more details, https://www.neogrowth.in/

NeoGrowth Launches Accelerator Business Loans Up to ₹ 20 Lakhs for Immediate Dissemination

Mr.Arun Nayyar,Whole-Time Director & CEO, NeoGrowth 

Neogrowth Launches Accelerator Business Loan; Fast-tracks Loans Up to INR 20 Lakhs - for Immediate Dissemination

Integrates Account Aggregator-based Digital lending across its portfolio

NeoGrowth, the MSME-focused FinTech lender leveraging the digital payments ecosystem, has announced the launch of its new business loan offering, NeoGrowth Accelerator, on the occasion of World MSME Day. The company recently kickstarted its MSME festival and will be undertaking multiple activities to celebrate the spirit of India’s small business owners. The company is now live on the Account Aggregator framework to further strengthen digital lending for MSME borrowers.

NeoGrowth Accelerator is a collateral-free term loan of up to INR 20 lakhs for the underserved MSME segment comprising Manufacturers, Distributors, Traders, Dealers, and Service Providers. The product is designed to fulfill the working capital requirements of GST-registered MSMEs based on their cash flows. This new launch is in tune with NeoGrowth’s ‘Keeping It Simple’ philosophy. NeoGrowth follows data-based decision-making and leverages scorecards and algorithms for customer assessment.

Through the Account Aggregator (AA) ecosystem, NeoGrowth aims to address the MSME credit gap in India and is among the early adopters in the NBFC sector to embed it into its processes. The company integrates account aggregator information, credit bureau scores, proprietary data, and other internal metrics to thoroughly assess potential borrowers and provide hassle-free loans that leverage the digital payments ecosystem. MSME customers will now be able to share all their banking information in a consolidated dashboard and avail credit in a seamless manner.

Arun Nayyar, Whole-time Director & CEO, NeoGrowth, said, “Our objective has been to enhance credit penetration among small businesses with seamless access to loans. Getting loans has always been a challenge for small retailers in India due to complex documentation, time-consuming procedures, and the traditional approach to underwriting. The Accelerator loans offer two convenient and quick options for businesses, with minimal paperwork to help our borrowers scale up their business easily. To make the loan journey simpler for our MSME customers, we have integrated the Account Aggregator framework across our processes.”

With close to a decade’s experience in serving the credit needs of India’s MSMEs, NeoGrowth has a finger on the pulse of small business owners and is constantly innovating to provide the best-in-class credit offerings to its customers. NeoGrowth leverages the latest developments in technology and data science to strengthen its unique product offerings.

NeoGrowth is a new-age digital lender, with a focus on Micro, Small, and Medium Enterprises (MSMEs). We are a Systemically Important, Non-Deposit taking Non- Banking Financial Company (NBFC-ND-SI), offering a wide range of products tailored to the dynamic needs of small businesses. Our data science and technology-led approach enable us to offer quick and hassle-free loans to MSMEs across 70+ segments across 25+ cities in India. We offer a unique daily repayment option to our customers with multi-channel repayment modes. We have served and engaged with 1,00,000+ businesses and supported them with their growth ambitions. We not only help small businesses grow but also drive financial inclusion making a positive social impact.

Founded by industry veterans, our Board of Directors comprises experts, who guide the leadership team toward our strategic goals. NeoGrowth is backed by renowned investors, namely Omidyar Network, Lightrock, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund, WestBridge, and Leapfrog Investments.

For more details, https://www.neogrowth.in/

51.4% of MSMEs Assessed were 1st Time Borrowers, says NeoGrowth Research

‘Social Impact’ study conducted from a base of 17,000 MSMEs across 7 cities; the research report highlights the credit inclusion of small and medium businesses 

An exhaustive study by NeoGrowth Credit on a base of over 17,000 MSMEs across cities including Mumbai, Delhi NCR, Hyderabad, Pune, Bengaluru, Lucknow, and Ahmedabad, revealed some interesting insights about the MSME industry.

Credit bureau scores have been traditionally used as a report card of one's credit history and repayment behavior. The lack of sufficient credit history or no credit history usually makes it difficult for the borrower to get loan approvals. According to NeoGrowth Research, over 51.4% of the MSMEs assessed were first-time borrowers.

According to the Sixth Economic Census released by the Ministry of Statistics and Programme Implementation in 2018, women constitute around 14% of the total entrepreneur base in India i.e. 8.05 million out of the total 58.5 million entrepreneurs. 

10.8% of the total disbursements of the 17,000 MSMEs assessed for FY2019-20 were towards businesses that were run by women either as sole proprietors, partners, or directors. 

The entrepreneurial ecosystem in India has been conventionally led by experienced players that have been reigning in their respective markets for generations. While first generation entrepreneurs are finally emerging in the scenario, they are starved of growth opportunities majorly due to a lack of credit. NeoGrowth Research establishes that about 77.6% of the MSMEs assessed were revealed to be first-generation entrepreneurs. 

With digital connectivity growing rapidly and emergence of smart cities, Tier-2 and Tier-3 cities are the new business hubs, employment centres and consumer markets of the country. About 19% of the MSMEs assessed in the study, were originating from Tier-2 cities.

The Indian Government considers MSMEs and entrepreneurship as key to driving economic growth, innovation, job creation and social upliftment across the nation. By generating 120 million employment opportunities, MSMEs boast of being the second largest job creators in the country. As per the study, 28% of the MSMEs assessed showed an increase in the number of their employees’ post availing a business loan.

These insights form part of an annual assessment conducted by NeoGrowth. Over these years, NeoGrowth the company has successfully maintained its unique product proposition by providing collateral free, short-term, quick, and customized business loans on flexible repayment terms. Having disbursed loans amounting to more than INR 5,500 crores, NeoGrowth has been funding and enabling MSMEs to grow and sustain their businesses while continuing to tread on its initial journey of achieving inclusive growth. 

Mr. Dhruv Khaitan, Founder and Chairman, NeoGrowth said, “We are happy to share our Sixth Social Impact Report, an annual effort to engage with our key stakeholders – MSMEs, to understand their financial needs, challenges faced by them and assess the impact of lending activities on their lives. At NeoGrowth, we have always focused on creating strong positive social impact on MSMEs by lending to first generation entrepreneurs, assisting women entrepreneurs and enabling our customers in job creation and improvement of credit scores via our loans.”

NeoGrowth Research is the in-house research team of NeoGrowth that keeps a continuous track on the emerging trends in the payments, fintech and MSME sectors and publishes insights.

About NeoGrowth:

NeoGrowth Credit Pvt. Ltd is a Systemically Important, Non-Deposit taking NBFC and a pioneer in SME lending based on the underwriting of digital payments data. NeoGrowth provides finance to small business owners to drive business growth that matches their ambitions. Hassle-free loans are powered by technology innovations and leverage the digital payments ecosystem. It provides financing to retailers, restaurants, apparel shops, kirana stores, petrol pumps, groceries, pharmacies and other MSMEs with flexible repayment options and customized products addressing multiple business needs. It not only helps its customers grow but also drives financial inclusion making a positive social impact. NeoGrowth is backed by renowned investors, namely Omidyar Network, Aspada Investment Company, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund and Leapfrog Investments.

First Gen Entrepreneurs and QSRs Taking over F&B Sector - Survey [Infographic]]

The Food & Beverages segment is thriving in India, with various new factors and trends emerging in and impacting the segment in significant ways. With over 2000 of its live customers belonging to the F&B space, NeoGrowth, an NBFC serving under-banked SME businesses to develop a robust segment-specific financial ecosystem, recently conducted a research to gain an insight into the nature and operational dynamics of players in this segment.

The research was led in 5 metro cities namely -- Bangalore, Pune, Mumbai, Delhi, and Hyderabad, and maps the various trends emerging in the space.

One of the biggest trends impacting the F&B space is the emergence of first generation entrepreneurs. In a market that has historically been dominated by multi-generational established players running for several years, relatively newer players with no previous business lineage and a vintage of less than 10 years have been observed to emerge and thrive in.

These entrepreneurs mostly own restaurants or bars, operating out of rented premises. Even though walk-ins make up for as much as 85% of the revenue for bars and restaurants and 69% for restaurants, these players have been observed to leverage food aggregating applications like Swiggy and Zomato to a significant extent. Mostly constituting of millennial entrepreneurs, these businesses utilize social media as an effective channel for marketing and promotions.

Another key trend that has been observed in the segment is the robustly expanding network of Quick Service Restaurants (QSRs). Although in its nascent stages, the trend of QSRs is rapidly gaining traction with increased urbanization, and evolving consumer lifestyles and behaviour.

Because of factors like minimal dine-in space and ready availability at odd hours of the day, as much as 50% of the revenue generated by these QSRs is through takeaways and home deliveries. With more and more players emerging in this segment and experimenting with cuisines, the QSR segment has been thriving in the metro F&B markets is projected to continue growing and expanding in Tier-II and Tier-III cities.

According to the report, digital channels have witnessed a significant rise in adoption, whether in terms of payments or presence. For instance, the usage penetration of digital payments is about 62%, whereas the mode of cash has now been limited to 37%.Moreover, over 69% of thesegment players surveyed are present on Swiggy, closely followed by Zomato at 65%. Catering has also emerged as a key revenue resource, with over 40% of them taking it up for higher profit margins. The peak months have been observed to be the festival season of October-February whereas the monsoon months of July and August have been observed to be off-season, especially for walk-ins.

Sharing an insight behind the curation of this research, Piyush Khaitan, Founder, NeoGrowth remarked, "At NeoGrowth, we have always strived to equip ourselves with a deep understanding of the segments that our customers belong to, in order to facilitate better prospects for them to address their credit challenges. The Food & Beverages segment forms a significant part of our clientele, with over 2000 of our live customers belonging to this space. Therefore, through this research, we wanted to draw key insights and map the various trends impacting this segment. We believe that this survey conducted will enable NeoGrowth to extend support to the F&B customers in a more segment-specific and consequently, an effective manner.”

The financial behavior was also mapped in the survey, and it revealed key patterns and needs of these segment players. For instance, considering how a majority of the customers surveyed are first-generation entrepreneurs, securing funds especially during the initial set-up is a challenge they typically face. These small and emerging businesses are often rendered ineligible by the traditional underwriting mechanisms due to factors like a lack of financial returns or a formal business history and low to no credit bureau scores.

Further, since most of these businesses operate out of rented premises,a lack of collateral also leads to them remaining underbanked. In order to ensure a smooth functioning for their business, these players are on the lookout for lenders that would facilitate credit for them to meet their immediate as well as long-term financial needs. This is where NeoGrowth comes in the picture.

Through its innovative tech-enabled and smart analytics-led approach, NeoGrowth assesses both traditional as well as non-traditional data points to power its underwriting mechanisms. This enables it to accurately validate the creditworthiness of a business, consequently offering the best-suited loan product for their specific needs. This research also signifies how the platform has been extensively working towards serving its customers in a more effective and segment-specific manner by gaining a deeper understanding of the same.By facilitating financial aid to numerous small and medium business merchants belonging to different industries and verticals, NeoGrowth is actively working towards its mission of creating a positive social impact whilesimultaneously contributing to the inclusive growth of India.

NeoGrowth F&B Report Infographic

NeoGrowth is a pioneer in lending based on the underwriting of digital payments data. The Company’s proprietary technology platform offers unsecured loans to merchants who accept card or other digital payments from customers.

Flexible repayment is a hallmark of the NeoGrowth business, offering customer’s small daily auto-repayment facility from card-based sales. NeoGrowth’s mission is to have a positive social impact on the financial lives of small and medium business merchants across India, more than 50% of whom are creditworthy but until now have been excluded from accessing loans based on traditional underwriting methods.

NeoGrowth is backed by renowned investors, namely Omidyar Network, Aspada Investment Company, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund and Leapfrog Investments.