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Time of India
29-04-2025
- Business
- Time of India
Tariff war puts Rs 21,800 cr in MSME, mid-corporate loans at risk: Report
India Ratings warns that Rs 21,800 crore in loans to high-risk MSMEs and mid-corporates are threatened by worsening operating conditions due to the escalating tariff war. MSMEs, particularly in sectors like chemicals and textiles, face growing vulnerability. Mid-corporates possess a stronger financial buffer, but a slowdown in demand could severely impact MSMEs. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Loans worth Rs 21,800 crore borrowed by high-risk MSMEs and mid-corporates could be at risk as operating conditions continue to worsen due to the escalating tariff war, according to domestic rating agency India Ratings. The agency predicts that MSMEs will face growing vulnerability, particularly those in sectors like chemicals, textiles, steel, and industrial machinery, which are negatively impacted by the ongoing trade tensions.A study of 1,898 listed and unlisted MSMEs, along with 1,055 mid-sized corporations, indicates that mid-corporates have a stronger financial buffer against unexpected financial shocks. India Ratings attributes this resilience to their better financial metrics compared to the 1,898 MSMEs, 6% are classified as high-risk, with an interest coverage ratio of less than 1.1 times and leverage exceeding 5 times. These MSMEs have total outstanding debt of around Rs 8,100 crore, accounting for 16% of the total debt held by the MSMEs tracked by India 5% of mid-corporates fall into the high-risk category, with total outstanding debt of around Rs 13,700 crore as of FY24, comprising 11% of the total debt of the 1,055 mid-sized corporates tracked by the rating agency's analysis reveals that, as of March 31, 2024, 23% of MSMEs remain stressed, with an interest coverage ratio of less than 1.1 times, compared to only 11% for mid-corporates.'Capex intensity is usually low among MSMEs, as they struggle more with working capital issues and require adequate finance at competitive rates,' said Neermoy Shah, Associate Director of Emerging Corporates at India a slowdown in demand could severely impact MSMEs, a reduction in interest rates and improved liquidity could provide some relief. Capital expenditure (Capex) by MSMEs has picked up modestly post-COVID but still lags behind historical levels. The agency notes that the lack of improvement in MSMEs' coverage ratios and the increasing number of loss-making MSMEs underline their susceptibility to external sluggish consumption trends and the global economic slowdown, particularly in the wake of the intensified tariff war, are likely to exacerbate the operating and credit challenges faced by MSMEs, India Ratings the 1,898 MSMEs studied, 50% are operating with a return on equity (ROE) of less than 5%, reflecting subdued capex activity over the past decade. Government initiatives like the Interest Subvention Scheme and Credit Linked Capital Subsidy Scheme have only slightly boosted capex over the last three years.'Any potential slowdown in both global and domestic demand, driven by the escalation of tariff war 2.0, remains a key deterrent to further capex by MSMEs,' the rating agency concluded.
News18
29-04-2025
- Business
- News18
Reciprocal Tariffs Will Exacerbate Stress For MSMEs: Ind-Ra
Published By : PTI Ind-Ra opined that the reciprocal tariffs will exacerbate stress for MSMEs, with revenue below Rs 250 crore India Ratings and Research (Ind-Ra) on Tuesday said reciprocal tariffs will exacerbate stress for medium, small and micro enterprises (MSMEs) but mid-sized corporates have a greater cushion against unanticipated financial shocks. With the worsening of operating conditions owing to the escalation of tariff war in April 2025, Ind-Ra expects MSMEs to turn more vulnerable, especially in the sectors where the impact of tariff war is negative. As of March 31, 2024, the agency's analysis suggested that 23 per cent of MSMEs remained stressed compared to 11 per cent for MCs (mid-corporates). MCs are better positioned than pre-COVID levels to manage business cycles. A study of 1,898 listed and unlisted MSMEs and 1,055 MCs highlights that MCs have a greater cushion against unanticipated financial shocks than MSMEs, given their healthy financial metrics. 'Capex intensity is usually low as MSMEs grapple more with working capital issues than MCs, and need adequate finance at competitive rates to manage those. Additionally, MSMEs – unlike MCs – are largely promoter-driven entities and lack a capable second line of management who have the knowledge and skill sets to bargain with lenders/suppliers/customers," Neermoy Shah, Associate Director – Emerging Corporates at Ind-Ra, said. Ind-Ra opined that the reciprocal tariffs will exacerbate stress for MSMEs, with revenue below Rs 250 crore and investment in plant and machinery below Rs 5 crore as of March 31, 2024, with moderate to high intensity. The credit profile of these entities has reverted to pre-COVID level, but the improvement has lagged that of MCs with revenues ranging between Rs 250 crore and Rs 1,000 crore as of March 31, 2024. Ind-Ra believes that any demand slowdown could impact MSMEs more than MCs, although a reduction in interest rates and an improvement in systemic liquidity could provide a cushion. MSMEs Capex has modestly picked up post-COVID but remains lower than historical levels. Lastly, the lack of improvement in the coverage ratios of MSMEs and the percentage of loss-making MSMEs further highlights the vulnerability of MSMEs to exogenous shocks. Externally, the sluggish consumption trends and global slowdown in the face of tariff war 2.0 may put a strain on MSMEs operating and credit metrics, Ind-Ra said. On April 2, US President Donald Trump announced that it will impose reciprocal tariffs on countries with which it has a tariff imbalance. On April 9, the US administration authorised a 90-day pause on the implementation of most reciprocal tariffs, reverting to a universal rate of 10 per cent on almost all targeted countries, while raising tariffs on most goods from China to 145 per cent. Later on April 16, the US further hiked tariffs on exports from China to 245 per cent. (This story has not been edited by News18 staff and is published from a syndicated news agency feed - PTI)
Time of India
29-04-2025
- Business
- Time of India
Reciprocal tariffs will exacerbate stress for MSMEs: Ind-Ra
India Ratings and Research (Ind-Ra) on Tuesday said reciprocal tariffs will exacerbate stress for medium, small and micro enterprises (MSMEs) but mid-sized corporates have a greater cushion against unanticipated financial shocks. With the worsening of operating conditions owing to the escalation of tariff war in April 2025, Ind-Ra expects MSMEs to turn more vulnerable, especially in the sectors where the impact of tariff war is negative. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" As of March 31, 2024, the agency's analysis suggested that 23 per cent of MSMEs remained stressed compared to 11 per cent for MCs (mid-corporates). MCs are better positioned than pre-COVID levels to manage business cycles. A study of 1,898 listed and unlisted MSMEs and 1,055 MCs highlights that MCs have a greater cushion against unanticipated financial shocks than MSMEs, given their healthy financial metrics. "Capex intensity is usually low as MSMEs grapple more with working capital issues than MCs, and need adequate finance at competitive rates to manage those. Additionally, MSMEs - unlike MCs - are largely promoter-driven entities and lack a capable second line of management who have the knowledge and skill sets to bargain with lenders/suppliers/customers," Neermoy Shah, Associate Director - Emerging Corporates at Ind-Ra, said. Ind-Ra opined that the reciprocal tariffs will exacerbate stress for MSMEs, with revenue below Rs 250 crore and investment in plant and machinery below Rs 5 crore as of March 31, 2024, with moderate to high intensity. Live Events The credit profile of these entities has reverted to pre-COVID level, but the improvement has lagged that of MCs with revenues ranging between Rs 250 crore and Rs 1,000 crore as of March 31, 2024. Ind-Ra believes that any demand slowdown could impact MSMEs more than MCs, although a reduction in interest rates and an improvement in systemic liquidity could provide a cushion. MSMEs Capex has modestly picked up post-COVID but remains lower than historical levels. Lastly, the lack of improvement in the coverage ratios of MSMEs and the percentage of loss-making MSMEs further highlights the vulnerability of MSMEs to exogenous shocks. Externally, the sluggish consumption trends and global slowdown in the face of tariff war 2.0 may put a strain on MSMEs operating and credit metrics, Ind-Ra said. On April 2, US President Donald Trump announced that it will impose reciprocal tariffs on countries with which it has a tariff imbalance. On April 9, the US administration authorised a 90-day pause on the implementation of most reciprocal tariffs, reverting to a universal rate of 10 per cent on almost all targeted countries, while raising tariffs on most goods from China to 145 per cent. Later on April 16, the US further hiked tariffs on exports from China to 245 per cent.
