Saurabh Gupta | 08 Jun, 2009
The global economic downturn has adversely affected the nation's SME sector. The tightening access to credit and weaker growth is cutting the revenue of this sector. And SMEs need to take the situation as a learning experience, that during the economic crisis there is deregulation of the economy, where most controls on setting up of new industrial units are removed, and a policy of encouraging enterprises is initiated. And so SMEs need to take this as an advantage. This was stated by Hema Hattangady, Vice Chairman & CEO of Conzerv Systems, in an exclusive interview with SME Times.

Conzerv Systems, stated as SME in early nineties, pioneered the design and manufacture of digital energy meters in India. Today, as the market leader with proven technologies and solutions for energy audits & energy management systems, it generates sales in excess of € 10 million and employs 337 people.

Recently Schneider Electric has announced that it has signed an agreement to acquire Conzerv Systems, the recognized market leader in energy efficiency in the Indian market, serving industrial and commercial end-users in particular.

In an exclusive interview to Hema Hattangady told SME Times about the challenges that Indian SMEs face in their way to success.

Excerpts of the interview...

Firstly congratulations for signing an agreement with Schneider Electric. How you this deal favourable to Conzerv Systems?
Hema Hattangady: Well, in many ways actually. We really had to make sure that the people that we have grown with in the company are retained and they get a global canvas and we know that it's going to happen. The second thing is that we were not strong in exports. Domestic market was a biggest thing...now we get exports. We get worldwide access to markets. The third thing we get access to the technology. And the fourth is that when we go to the market and say that we have an energy audit for you, and we find out what they need. Now I can pull through a huge basket of products which we didn't have and Schneider has. So in multiple ways we see there are synergies.

How do you see the journey from a SME to becoming a MNC?
Hema Hattangady: Exciting...Because we share the same values and the vision as Schneider Electric does. And that was one of the chief reasons why we agreed to this acquisition. Because if there is no commonality of values at the top, we wouldn't have gone for this deal. We certainly didn't want to compromise on anything that we have built all these years.

What were the difficulties you had gone through during this journey?
Hema Hattangady: Firstly, it was attrition of talent. We had to keep making sure that the best people that we had grown with then stay with us.

The second of course was competition. As every time you make a good product, somebody else is trying to copy it. And we always had to make sure that we are investing enough in our research and development (R&D) so that we are ahead in the market. And when you are in a small scale and we have high ethical standards, it's very difficult to do both these things.

Another thing was also gaining the customer's respect for quality. That actually turned out to be the easier part because we believe that if you put the best product out in the market people will come and pick it. So support has been a very very critical part of our journey. That means a lot of investment in support. You don't always get it back by way of margins, but you get bank in hands to brand reputation.

Credit availability is one of the biggest challenge that SMEs have and to setup a R&D department requires lots of investment. In your views how difficult is it to set up a R&D section for a small businessman?
Hema Hattangady: It's been very difficult and that's why we are very happy that we have our own R&D section. Besides the costing factor getting the best talent, and making sure that they know what they are doing is always a big challenge. And retaining them and to teach them is also a big thing.

In your views, which one is the biggest challenge that most of the SMEs are facing in India?
Hema Hattangady: The biggest challenge that we are facing today is access to liquidity. Another thing I must say is that the global economic downturn has adversely effected the SME sector in the nation. The tightening access to credit and weaker growth is cutting the revenue of this sector. And I must suggest that the SMEs need to learn a lesson that during the economic crisis there is deregulation of the economy, most controls on setting up of new industrial units are removed, and a policy of encouraging enterprises is initiated. And so SMEs need to take this as an advantage.

What do you think the government can do in this direction?
Hema Hattangady: I think that the government should just do what it's talking about today, which is disinvestment, privatization and try and cut some government expenditure and keep some money for the economy. There is need for massive implementation of schemes that are meant for this sector such as Prime Minister's Employment Generation Programme (PMEGP), sector specific interest rate cuts, and subsidies for processing and R&D to make SMEs more dynamic.