Dec 19, 2014, 04.20 PM | Source: CNBC-TV18

Investment in SMEs would return, says Chanda Kochhar

In a chat with Shereen Bhan, ICICI Bank, managing director Chanda Kochhar said that resilience factors for SMEs are smaller, but she believes investment will return soon in the sector.

Small and medium enterprises ( SME ) which are considered growth engines of our country, have seen some really difficult time over past year with the slowdown in economy and investment drying up. In a chat with Shereen Bhan, ICICI Bank , managing director Chanda Kochhar said that resilience factors for SME s are smaller.

"So even when we talk of elongated working capital cycles, in a way they see pressures of not just slowing sales growth but people in a way pulling away the working capital that was normally given."

She is however hopeful that with the pick up in investment cycle interest in SME will return. She pointed that SME s from pharma and education sector continues to see new investment, however others SME s from construction or infrastructure sector will take some more time to revive.

"Their ability to invest or bringing back the investment cycle will be dependent in a large way on what happens to the economy and the overall investment cycle in general," She said. Recent initiatives such as an exclusive exchange for SME s, easier access to private equity investor would help SME s to grow in future.

Below is the verbatim transcript of the interview.

Q: It has been a difficult year for India and for the small and medium-sized enterprise ( SME ). They have borne the brunt of the slowdown that we have seen in the general economy. How would you sum up the experience for the Indian SME in the year gone by?

A: It has been a challenging year for the Indian SME s. In a way we have to remember that for them the resilience factors are actually smaller and in a way when the pressure has worked the presser has worked from all sides. So even when we talk of elongated working capital cycles, in a way they see pressures of not just slowing sales growth but people in a way pulling away the working capital that was normally given. I am not saying the other way round but for them the trade cycles just get more and more elongated whether it is from their suppliers or from their buyers both ways. So in that sense they do face the pressures all the time. 

To be fair to the banking sector banks look at the SME s with a very open mind and wherever we believe that the viability is intact the banks have been taking a very comforting kind of an approach towards the SME s as well.

Q: Are you seeing any offshoots in terms of the performance within the SME sector? There has been a lot of talk on a revival of sentiment and a revival of the investment cycle, sentiment has changed for the economy in general but there has been no pick up in the investment cycle. However on the ground as far as SME s are concerned are you actually seeing any pickup in terms of the investment cycle?

A: The SME s are moving, the experience is very different across different industry segments. So if you look at some of the industry segments like pharma, education, in some sense investment continues to happen. However in some other industries like construction or infrastructure, just their ability to invest or their requirement to invest just depends on what is happening to the larger economy in a much bigger manner. So that is where the pressures are but in general therefore their ability to invest or bringing back the investment cycle will be dependent in a large way on what happens to the economy and the overall investment cycle in general.

Q: Are you beginning to see any turn in the capex cycle, any signs of the investment cycle picking up? Anybody can crib about the fact that approvals are pending or clearances are pending but we hopefully will get past that. If that does happen do you actually see a turnaround or is the consensus really going to be the earliest we could see a big significant turnaround summer next year?

A: If we talk of turnaround let me break this into two. One is the broader sentiment movement and the other is on the ground capital investment. In terms of the broader sentiment movement a lot of positives have happened starting from September-October as we saw a lot of announcements and even the fact that the Finance Minister went out, met investors. We have a much open and better communication with the credit rating agencies now and in a way I would think that the Budget really did what it could because we always rely on Budget as a one day cure for 365 days.

Q: He has clearly said expect more steps over the coming weeks.

A: Absolutely so in that sense a Budget did a lot frankly if you ask me to that extent that the Budget can do. But from here on the biggest thing in my view that is required for our economy to kick start or restart is really getting back the investment cycle. And there not much change has happened.

ICICI Bank stock price

On August 05, 2015, ICICI Bank closed at Rs 311.10, down Rs 3, or 0.96 percent. The 52-week high of the share was Rs 393.30 and the 52-week low was Rs 280.55.


The company's trailing 12-month (TTM) EPS was at Rs 19.80 per share as per the quarter ended June 2015. The stock's price-to-earnings (P/E) ratio was 15.71. The latest book value of the company is Rs 138.52 per share. At current value, the price-to-book value of the company is 2.25.

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