Rules for MSME Turnaround

The Micro, Small and Medium Enterprises (MSMEs) are defined in India by MSMED Act,2006 on the basis of capital investment made in plant and machinery, excluding investments in land and building

Manufacturing Sector
Enterprises                Investment in Plant and Machinery

Micro           :               Up to Rs 25 Lakhs
Small           :               Between Rs 25Lakhs to Rs 5 crores
Medium      :               Between Rs 5 crores to 10 crores

Service Sector
Enterprises               Investment in Plant and Machinery

Micro          :                 Up to Rs 10 Lakhs
Small          :                 Between Rs 10Lakhs to Rs 2 crores
Medium     :                 Between Rs 2 crores to 5 crores

The MSME unit is considered to be sick:
1. If the borrower account of the enterprise remains NPA for three months or more
2. Erosion in net worth due to accumulated losses to the extent of 50% of its net worth during the previous accounting year

Path to recovery of a sick MSME unit

Crisis Phase——–> Stabilisation Phase————> Growth Phase

Rules for Business Turnaround

1. Get the picture of current financial position of the business
This can be found in the financial statement of the business if there is any.

2. Review operational policy of the business
How things are done in the organisation

3. Observe the processes followed in the business
Find out the internal control Process (collection of policies, conventions, norms and organisational structures               which reduces risk to a business model of an organization) and interview the employees, suppliers and customers       of the business

4. Stabilise the current financial position
Based on the inputs, apply cost cutting measures to improve cash flow of the company

5. Inject new capital in the company to carry its day to day operations

6. Evaluate strategic Options
Detailed Strategic Business Analysis to find unique competence and ways to differentiate its products. Keeping in       mind the following :
• Satisfying customer needs
• Keeping employees happy at their job
• Complying with regulations
• Operating Profitably
• Striking a balance between short term and long term concerns

7. Implement and Monitor chosen option:
Re-evaluate the whole change management system and any corrective action taken

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