This is the fifth Best SME Survey that Business Today has conducted. The on-ground survey is carried out by YES Bank, which is BT's knowledge partner. Providing an independent validation to the survey and its findings is Grant Thornton.
Over the past five years, the survey has gained traction and prestige, and is today counted as the premier study of its kind for small and medium businesses. Such enterprises form the very backbone of India's economy, and provide lakhs of jobs to people.The purpose of the BT-YES Bank Best SME Survey is to find the top performers among this community of small businesses, and award and encourage them for their good work. The study itself is spread over three extensive phases. Phase I comprises data collection and initial quantitative analysis, Phase II comprises a more intensive analysis of numbers, and Phase III comprises a jury meeting. The entire study for this year took five months - from January to May 2014 - with the jury meeting being held in early June.
All SMEs with turnover less than Rs 200 crore are eligible to apply, and are divided into two categories - small (net sales less than Rs 50 crore); and medium (net sales between Rs 50 crore and Rs 200 crore). There are eight awards, with seven of them having two awardees, one each from the small and medium categories, respectively. The award for Best SME in North East India is given to only one company. So, that effectively makes it 15 awards.
Apart from the net sales thresholds, there are additional criteria for some award categories:
Best SME for Innovation: SMEs that have spent on R&D or have few products/process patents
Best SME for CSR: SMEs that have spent on CSR initiatives
Best Green SME: SMEs that have taken measures for waste management or have used renewable eco-friendly materials
Best SME in International Trade: SMEs that have foreign exchange revenues forming part of their turnover Best SME for Corporate Governance: SMEs which are listed/complied with Clause 49 requirements
Phase I (Quantitative Analysis)
However, this year several of the applying companies were filtered out even before the first round, because the details they provided were sketchy. Having focused more on quality entries this year, we ended up with slightly more than 100,000 applicants for Phase I.
The first phase comprises an assessment of balance sheet and profit and loss numbers of applicants, which these SMEs submitted through an application form. Companies that failed to meet the following criteria are weeded out: minimum three years in business; audited financials available; profit after tax (PAT) and net worth positive. The remaining companies are then analysed on their growth (in turnover and PAT); and profitability (PAT margin and return on equity).
To factor in sectoral differences and characteristics, peer set comparison is done and top performers from each sector shortlisted. To ensure all-India representation, some top-rated companies from each region are shortlisted. And, for categories such as Best SME for Innovation and Best SME in Social and Environmental Responsibility, relevant parameters such as spends on R&D, products/patents, CSR and green initiatives are considered. A total of 4,307 companies made it to Phase II after this exhaustive round.
Phase II (Detailed Survey)
Additional checks such as site visits, background checks, interactions with promoters or senior executives are also done. The first two phases are carried out by YES Bank, and the findings validated by Grant Thornton and, finally, by Business Today. At the end of this process, three finalists are selected for each of the 15 awards.
With some companies getting shortlisted for more than one award, there were finally 39 companies vying for the 15 awards this year.
Phase III (Jury Meeting)
The list of nominees by category is then presented before an eminent jury panel for deliberation.
This year, the panel comprised these leading names: Madhav Lal, Secretary, Ministry of Micro, Small and Medium Enterprises; Ashish Kumar Chauhan, Managing Director and CEO, Bombay Stock Exchange; Rajiv Luthra, Managing Partner, Luthra & Luthra Law Offices; and Sachin Nigam, Head of SME Ratings, Crisil. Sanjay Agrawal, Senior President - Business Banking of YES Bank, and Vikas Gambhir, Director, Business Risk Services at Grant Thornton, provided knowledge support.
The meeting was moderated by Josey Puliyenthuruthel, Managing Editor of Business Today. The group met on June 9, and over a stimulating discussion of almost two hours, selected the final winners.