COVID-19 impact | 47% Indian startups, SMEs left with less than 1 month of cash, many out of funds already

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Indian startups and small and medium enterprises (SMEs) are among the worst-hit by the sudden halt in economic activities during the nationwide lockdown to contain the spread of COVID-19. Over 80 percent of startups and SMEs across the country expect either scaling down of their operations or shutting it down completely or selling off their businesses over the next six months.

As per a survey conducted by community and social media platform LocalCircles, 47 percent of Indian startups and SMEs have less than a month of cash left while many of them have run out of funds already. The survey, conducted among small businesses including startups, SMEs and entrepreneurs located in over 90 districts of India, received over 13,970 responses.

Also, 24 percent of respondents have said they have cash only for up to three months and 23 percent only for up to six months. Only 6 percent of the startups and SMEs hav said they are covered for more than six months.

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The idea, the report noted, was to get a pulse on how smaller businesses are doing in the middle of the ongoing crisis and how they foresee their company's health in the coming few quarters.

When asked what they see happening with their enterprises over the next six months, about 61 percent of them said they are looking at scaling down, 7 percent said they were looking at selling their businesses and 13 percent said they are looking at a complete shutdown.

The outbreak of COVID-19 has pummelled businesses world over, with several sectors hit worse than the others. The lockdown implemented to contain the spread of the disease has further left many enterprises cash-dry due to the sudden pause in their revenue as economic activity has come to a standstill.

Startups and SMEs in India have also reached out to the government seeking help in tiding over the current crisis. They submitted various demands via LocalCircles, of which a few were reimbursement of 50 percent of startup employee salaries for a month or a one-time grant of Rs 20 lakh registered startups.

In March, Indian startups saw their funding drop by over 50 percent. They raised about $354 million across 34 deals in March 2020, less than half the $714 million raised in February across 46 deals, according to data from startup data tracker Venture Intelligence.

Read More | Coronavirus impact: Startup funding falls 50% in March

As reported earlier this month, over a dozen startups have also asked venture debt firms for a longer time to pay back their debt than originally agreed. Those in sectors worst-hit by the pandemic - travel, hospitality, transportation, and even delivery firms - have asked for up to 6 months more time than originally planned, the report noted.