Monday, February 5, 2024



Mumbai, February 5, 2024: India’s Micro, Small and Medium Enterprises (MSME) ecosystem plays a vital role in shaping and growing the country’s economy. Post the COVID-19 pandemic, that is, from FY21 to FY22, the contribution of MSMEs to India’s Gross Value Added (GVA) has grown significantly. A joint report by U GRO Capital and Dun & Bradstreet, titled ‘MSME Sampark Bi-annual report on the latest in MSME lending ecosystem’, takes a close look at where the Indian MSME segment is positioned now after having stepped out of the COVID-19 pandemic, the credit scenario in the segment, the formalisation of credit in the segment and the increasing ticket size of loans, among others. The report also signals optimism for domestic demand and profitability and is highly optimistic of the increasing capex and hiring by MSMEs which bodes well for the overall growth momentum.

Shachindra Nath, Founder and Managing Director, U GRO Capital, said: “This report highlights the critical role that MSMEs play in shaping the destiny of the Indian economy. It takes a deep dive into the nuances of the MSME sector, shedding light on its resilience, innovation, and the pivotal role it plays in fostering economic growth and employment.”

Avinash Gupta, MD & CEO - India, Dun & Bradstreet, said “India aims to be a US$30 trillion economy by 2047, roughly 8x increase in two decades. MSMEs contribute nearly a third of India’s GDP. It is imperative that MSMEs scale up significantly and quickly, necessitating estimated US$11.5 trillion financing requirement in fixed assets. The MSME Sampark report jointly produced by Dun and Bradstreet and UGRO Capital aims to track MSMEs performance, credit behaviour and financial environment on a bi-annual basis. We have observed that businesses optimism of MSMEs has soared to the highest level since 2022, indicating improvement in performance even in the face of difficult external environment. Moderate delinquency rates and low sector risks have also improved MSMEs borrowing prospects. The Government’s continued thrust on formalization is furthering the formal credit penetration in the sector”. 

The MSME Segment: Where It Stands Now: 

Post-pandemic, India is one of the fastest growing major economies. India’s real gross domestic product (GDP) at constant prices (2011-12) grew by a faster-than-expected 7.6% in the July-September quarter of 2023. For the full financial year, the economy is expected to register 7.3% growth, compared to 7.2% a year ago.

In this background, the report says that post-pandemic, good recovery was seen in smaller entities, though at a slower pace than the larger ones: over 50% of entities with turnovers less than Rs 10 crore witnessed Year-on-Year (YoY) growth of over 10%, compared to ~60% for higher turnover entities. Over a three-year period, 25,000+ MSMEs were studied to prepare this report. The study showed a dip in business and sales activity in the year of the pandemic, followed by a massive 77% of customers showing resumption of activity in the first year after the pandemic, and over 68% of customers showing over 10% Y-o-Y sales growth in the second year after the pandemic. As a result, risk levels have fallen and delinquency rates have improved in the MSME segment which, in turn, is improving the prospects of borrowings by MSMEs. 

This is resulting in increased credit growth and the share of credit disbursed to MSMEs by Scheduled Commercial Banks (SCBs) and non-banking finance companies (NBFCs).

MSME’s Credit Standing

According to the report, MSMEs are increasingly realising that to grow, getting formal recognition is vital, which will help them receive credit from formal institutions (banks and NBFCs) and the various benefits offered by ongoing and future schemes from the government. This is seen from the fact that since the inception of UDYAM in 2020, MSME registrations on the platform have increased 2.4 times, while they have generated 1.6 times more employment opportunities by FY23.

A study done across 10,000+ micro-sized MSMEs shows rising credit penetration in the sector reflecting the lenders’ positive view on their resilience and recovery.

Formalisation of Credit

Formal credit penetration to MSMEs is expected to increase as the government acts proactively towards the formalization of MSMEs.

India’s credit penetration of 52% is the lowest among its Asian peers: China stands at 185%, South Korea at 175%, and Vietnam at 126%. The Bank credit to Gross State Domestic Product (GSDP) ratio for the majority of states is below the national average; only Maharashtra, Telangana, Tamil Nadu and Delhi have credit to GSDP ratio penetration above the national average. Now, as the MSMEs get formalised through the various direct and indirect incentives that the government (Central and State) undertakes, formal credit penetration to MSMEs is expected to increase. Also, thanks to the various policy interventions taken by the government to increase the productivity and competitiveness of MSMEs, skill development, technology upgradation and market access, MSMEs are likely to grow which is crucial in sustaining the current momentum. 

Increasing Ticket Size of Credit

Ticket size of loans by lenders to MSMEs has increased post-COVID-19, while approval rates have fallen indicating cautiousness after the removal of pandemic relief measures.

Healthy penetration of credit is seen across sectors and geographical footprints across the studied universe of business entities. Interestingly, smaller entities are seen borrowing more relative to their scale of business to meet capital needs during a growing phase. Maharashtra, Gujarat, and New Delhi top the list in the distribution of debt, while Light Engineering, Hospitality, and Healthcare are the sectors that attracted the most debt.

Key Highlights of the report

Global growth slowed markedly in 2023, and we expect growth to remain subdued in 2024. With a growth rate of 7.3% in FY23, India is poised for a strong growth in FY24.

We understand that a robust MSME activity will be pivotal to India’s growth story. 

MSME sector in India continued to demonstrate resilience and growth. Since its inception in 2020, MSME registrations on UDYAM have increased by 2.4 times by FY23, while they have generated 1.6 times more employment opportunities.

Despite the ongoing global economic slowdown, the optimism level among small businesses persists reaching a peak in Q4 2023, the highest since 2022.

Dun & Bradstreet’s proprietary risk rating score of MSMEs indicate that risk to MSMEs moderated in 2022 compared to 2019.

Low risk in the MSME sector and declining delinquency rates are enhancing the borrowing prospects for MSMEs. Both SCBs and NBFCs share of credit to micro and small firms has increased in FY23 compared to the pre-pandemic period.

Post pandemic, ticket size of loans by lenders to MSMEs has increased while approval rates have fallen indicating cautiousness after the removal of pandemic relief measures.

The drop in the approval rate is greater in PSUs for both the medium risk and high-risk firms while NBFCs remain the most cautious for the high-risk firms.

Highlights of the sectors covered in the report:

Light Engineering

Among MSMEs, enterprises in the iron, steel and other metal works have the highest market size and it is also the most efficient sub-sector in terms of debt to total turnover across various sizes of entities. While enterprises in this sector are seen across India, Maharashtra is the dominant market with subsector hubs such as Gujarat for plastic/ glass/ ceramic products.

Food Processing

Animal or vegetable fats/oils and waxes, edible preparations, fruits, nuts, and cereals are the major contributors to the food processing sector in the MSME segment. Cash dealings are the highest in this sub-segment compared to other sectors. While there is a presence across India, the dominant markets are Maharashtra, Gujarat and Rajasthan.

Electrical Equipment

Miscellaneous equipment and appliances, heavy equipment/office machines, electrical circuit components, and electronics equipment in communications are the other dominant sub-industries. It has a pan-India presence, with Maharashtra being the dominant market, and Gujarat and New Delhi being sub-sector hubs.

Chemical Industry

Half of the turnover in this sub-sector is accounted for by organic chemicals, inorganic chemicals, and fertilisers. It has a pan-India footprint.


Healthcare delivery and service (dealers, distributors, hospitals, diagnostic centres) account for the lion’s share of the market and recipients of a majority share of credit to the sector. As in other sectors, smaller entities (dental clinics, eye clinics and pharmacies) require growth capital, which can be met through various business loan and equipment financing solutions.

Auto Component

Vehicle and vehicle parts contribute to a major part of the Auto component industry, whereas Hotel, Food, Transport and Manpower services form a majority of the market and are recipients of a larger share of credit.

Methodology of the Report

The report leverages various public and Dun & Bradstreet’s data cloud to analyse overall MSME segment’s health and credit requirements. Detailed financial analysis of sample MSMEs firms in eight sectors are undertaken to understand and risk dynamics. The report includes insights derived from niche study of 25,000+ MSME’s financial and repayment performance over 3-year timeframe. These MSMEs have a turnover of less than 100 crores and operate in UGRO focussed sectors.

About UGRO Capital Ltd (NSE: UGROCAP I BSE: 511742)

UGRO Capital Limited is a DataTech Lending platform, listed on NSE and BSE, pursuing its mission of “Solving the Unsolved” for the small business credit gap in India, on the back of its formidable distribution reach and its Data-tech approach.

The Company’s prowess in Data Analytics and strong Technology architecture allows for customized sourcing platforms for each sourcing channel. GRO Plus module which has uberized intermediated sourcing, GRO Chain, a supply chain financing platform with automated end-to-end approval and flow of invoices, GRO Xstream platform for co-lending, an upstream and downstream integration with fintechs and liability providers, and GRO X application to deliver embedded financing option to MSMEs.  

The credit scoring model GRO Score (3.0) a statistical framework using AI / ML driven statistical model to risk rank customers is revolutionizing the MSME credit by providing on-tap financing like consumer financing in India.

UGRO has executed Co-lending model in India which is prevalent in the West through Co-Lending relationships with 10+ Large Public Sector Banks and large NBFCs and built a sizeable off-balance sheet asset of more than 45% of its AUM through the GRO Xstream platform.

The Company is backed by marquee institutional investors (raised INR 900+ Cr of equity capital in 2018 and INR 340 Cr in 2023) and aims to capture 1% market share over the next three years. For more information, please visit:

About D&B

Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet’s Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit

Dun & Bradstreet Information Services India Private Limited is headquartered in Mumbai and provides clients with data-driven products and technology-driven platforms to help them take faster and more accurate decisions across finance, risk, compliance, information technology and marketing. Working towards Government of India’s vision of creating an Atmanirbhar Bharat (Self-Reliant India) by supporting the Make in India initiative, Dun & Bradstreet India has a special focus on helping entrepreneurs enhance their visibility, increase their credibility, expand access to global markets, and identify potential customers & suppliers, while managing risk and opportunity. 

India is also the home to Dun & Bradstreet Technology & Corporate Services LLP, which is the Global Capabilities Center (GCC) of Dun & Bradstreet supporting global technology delivery using cutting-edge technology. Located at Hyderabad, the GCC has a highly skilled workforce of over 500 employees, and focuses on enhanced productivity, economies of scale, consistent delivery processes and lower operating expenses. Visit for more information. 

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