Business has never been better, Rohan Sharma said. A rapid boost in his auto parts company sales was seen, mainly in the western Indian state of Gujarat, and its order book has nearly doubled last year.
Sharma’s Bhagirath Coach & Metal Fabricators recently invested almost $120,000 set for new machinery and plants to shed funds worth $1.2 million this year to engage capacity expansion.
Subsequently, it seemed to be an advantage for Asia’s third-largest economy, where disappointing balance sheets at larger firms, including weighty reliance on bank credit has withered and was later followed by rising concerns on loans. It has, therefore, hindered initiatives to recuperate private investment.
Sharma remained at ease. He stated that his companies are debt-free and depends mostly on internal resources to fund capacity expansion.
Hearing this, a survey released by the Reserve Bank of India showed he is not alone, as the annual study of almost 240,000 unlisted small- and medium-sized enterprises are likely saving their way to expansion, which aids India to transform into the world’s fastest-growing large economy two years ago.
The country has over 45 million SMEs, which accounts by almost 40 percent of gross domestic product (GDP), considering most of it are not listed. Moreover, their earnings growth has outperformed listed firm for the past three years.
'We never allowed exuberance to get the better of hard business logic,' Sharma said.
According to a survey from the central bank, sales at smaller private companies has seen 12 percent growth in 2014/15. Sales at listed large firms rallied by about 1.4 percent amid the same period.
Operating Profit of Unlisted Firms
In addition, the operating profit of the unlisted companies has seen a 16.6 percent growth in an annual basis this year, which seemed to post three times the pace at listed firms, and their gross savings increased as well.
Though the net profit growth of private companies splits higher expenses, it still managed to acquire a double-digit pace. In contrast, listed firms fought with declining profits.
Debt-laden large listed companies remained hesitant to start new investments, and foreign companies can find labyrinthine policies of India overwhelming.
It also lacks with resources needed for complex manufacturing such as roads, skilled labor and standard power supply.
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