Big shot directors to rebrand MSMEs

With Gen-Next keen to take over the reins of the family-owned businesses, Corporate Governance (CG) has come into focus. They want competence and competition to co-exist. Understanding global businesses and following the latest trends to attain size and scale is what matters to them. 

Speaking on the changeover is TMS Mani, Advisor, Reliance Industries, who says, “CG makes you more organised, meticulous and transparent in your functions. There is a hunger in the new generation to not remain satisfied with doing good business. Growth and scale is what challenges them.” Mani’s clients are predominantly micro, small and medium enterprises (MSMEs). A high-volume customer for polymers has grown from a turnover of Rs 70-80 lakh in the Eighties to Rs 800 crore. With statutory compliances in place and every movement (of goods) being tracked, CG is imperative. 

“But, the importance is not understood. It is not yet a priority for the MSMEs except for those generating Rs 100 plus revenues. But the next generation is getting more organised,” he says. For Reliance, Tamil Nadu, Kerala and Puducherry contribute Rs 2,500 core revenues, constituting 8-10 per cent of its overall polymer business. A look at the post-independence period will show concerted efforts by the government to promote industrialization by establishing industrial parks in the country. Tamil Nadu took the lead with the formation of industrial estates in places such as Ambattur and Guindy, one of India’s oldest industrial estates. They are now considered the manufacturing hubs, with the strong foundation for business laid down in the Sixties, paying off in the long run. 

TN accounts for the largest number of (15.07 per cent) MSMEs in the country with 6.89 lakh registered MSMEs, producing over 8,000 types of product for a total investment of over Rs 32,008 crore. However, Minister of State for Commerce Nirmala Sitharaman has openly said the increasing thrust needed for the MSME segment as its contribution in developed economies such as France, Germany and England, is the highest unlike our economy. 

In this context, the two-day programme on ‘Improving the Effectiveness of the Board of MSME’s’ conducted by the Indian Institute of Corporate Affairs, seems relevant. It was attended by Directors of MSME and senior professionals from large firms interested in guiding MSMEs in future as Independent Directors. D Arvind, Managing Partner of D Arvind & Associates LLP, says CG practices are still evolving in India. In the future, only corporations which follow best CG practices would survive and grow, he adds. Echoing this is Chandra Pratap of Cartello Associates, a management consulting firm essentially catering to Foreign Direct Investment clients. Domestic companies are simply not ready to embrace CG practices. 

“At least when revenues touch double-digit, companies must start giving it the importance it deserves. Tax-saving mechanisms and short-cut methods to avoid tax are the focus of enterprises instead of adopting standard bench marking processes,” he laments. Meanwhile, senior industry professionals like Lavanya Nandakumar (who did not want to name her company citing disclosure norms) are willing to invest time on thoroughly understanding the nuances of CG and be prepared for future Board positions.