Funding is Easily Available for Small Pharmacos

Funding is Easily Available for Small Pharmacos

Small & medium-sized companies form a considerable chunk of the Pharmacos in India. The fast growing commercial loans market has ensured that they get funds whenever required. TS Krishnaswamy, DGM (Trade & Services) SME BU of State Bank of India, India’s largest bank, comments on the funding scene.

TS Krishnaswamy
DGM (Trade & Services), SMEBU

State Bank of India

What impact will GST regime have on the Indian pharma sector?

The small-scale industries enjoy certain tax breaks and benefits. This has led to mushrooming of small business units with more or less common facilities. To avoid piercing the ceiling, SMEs often open new business units and start billing their products in the name of these new companies.

These practices also result in the same workers being shown under different firms. But as a result, the firms also lose out on certain other privileges, which accrue to them through numbers, such as ESIC benefit.

When we move into VAT and GST systems, these anomalies will be removed.

What are your finance options for the pharma and biotech SMEs?

Pharma and Biotech industries are high growth sectors. The SMEs in this sector, like all other SMEs, depend on debt capital rather than equity capital and look up to financial institutions for support.

We have liberal assistance schemes for the sector. State Bank provides full range of loan products for the pharma and biotech sector, covering all their assets.

There are special schemes for ISO certification and for installing quality control kits in the SME units. Often we have observed that the SME units are not able to plan their cap-ex well in advance.

To facilitate capital expansion at any point of the calendar year, we have launched a unique product called ‘Open Term Loan’ for meeting all capital investments, including R&D and marketing expenses.

So, Pharma and biotech units launching new product lines can use this loan product to meet their pre-launch expenses or other market research needs.

How can SMEs become growth drivers given the rapidly changing competitive business environment of today?

The SMEs do not have advertising and marketing reach like the larger players. Often, they have to do grass root level marketing that may result in higher ‘per-unit’ marketing cost.

They need some support in the form of tax and excise concessions to keep them afloat.

As India matures as an industrialized economy, there is a lot of outsourcing and decentralization taking place. The pharma being a highly unorganized segment, its SMEs have a huge opportunity of reaping the fruits of India’s booming economy.

This has resulted in SMEs filling up the gaps for Industry Majors.

With the new concepts such as zero inventory and just-in-time manufacturing becoming buzz words, outsourcing has taken deep roots in the pharmaceutical sector. But to survive, the SMEs need to be cost effective as well as quality conscious.

The SMEs have their strengths in their flexibility in product lines, ability to meet smaller order sizes and meet the demands in the quickest of time.

What should the Pharma & Biotech companies lobby for?

The Biotech, the Pharmaceuticals and the suppliers must ensure that the government always bears in mind that the Pharma and the Biotech businesses are highly knowledge-driven. They carry high levels of intangible assets, such as product knowledge and patents.

The Pharma industry requires constant research and up-gradation. At the SME-level, the individual units can not make huge investments in such activities on their own.

There needs to be an eco-system oriented approach. There should be incentives for the colleges, universities to work on projects on behalf of the SMEs. This will be of mutual benefit to the SME as well as the academies. The pharma companies–large as well as medium sized–should lobby for a strong government role in such initiatives.

Pollution and waste management is another key area of concern for this sector. Pharmacos should ensure that Government policies are supportive.

And finally industry should lobby for a constant supply of Power.