These are exciting times at NSIC. If the company stopped a whisker short of the billion-dollar mark in FY10, it leaped past the benchmark in the just concluded year, clocking revenues of close to R7,700 crore. That left it with a net profit of R35 crore, a 45% jump, coming on top of a four-fold rise in earnings the year before.
If the profit figure is not so impressive, there is a reason behind. Being a PSU, profit is not a goal in itself for the National Small Industries Corporation. ?The goal is to be a self-sustaining corporation, not a profit-making one?, explains HP Kumar, chairman and managing director. That is in line with the government (shareholder) brief: ?Run the corporation sustainably, don?t ask us for money.?
Armed with the mandate, Kumar, now in his fifth year at the helm, went on to build a self-sustaining business model for the corporation, which is essentially a government intermediary and facilitator of micro and small industries, working in tune with policy objectives. What came in handy for him were the research he had done on his doctoral thesis, ?Poverty Alleviation through Rural Industrialisation? and chance lessons he got in Performance Management System in the US. While his years of experience as a banker and cost accountant aided the process, an ISO 9001: 2008 certification for the corporation made the final cut.
The strategy was simple. Add an element of incremental revenue in all schemes?existing and new?and put systems in place to ensure that volumes are built up, so that the incremental revenues add up to a sustainable figure. Thus, NSIC became a bulk supplier of raw materials, consortia bidder for big government contracts, single-point agency for government purchases, B2B marketer, marketing intelligence provider, financial consultant and many more for MSMEs. ?We have made the marketing strategy very flexible and need-based. I can open 10 offices in a month, if there?s a need?, says Kumar.
At the same time, performance standards are very rigid. ?We enter into an MoU with each office at the beginning of the year, setting out various targets for them for the whole year. Then, we monitor the performance on a weekly basis.? He says there is no ambiguity about the targets. ?Everything is there in black and white for them, divided into 52 weeks.? Kumar takes full credit for evolving such a system, which he says would be rare even in private companies.
A major revenue stream for NSIC is raw material supply to micro and small units. It buys in bulk from big producers and sell to small units at (producer) published rates. NSIC takes a commission from the producer while the small buyer gets raw material at factory gate price. In consortium bidding?it pools together a group of small manufacturers and bids for huge government orders?it takes a commission from the small units. The same goes for arranging finances, machinery import and the like. But the success of all this, Kumar realised, hinges wholly on customer satisfaction.
That meant ushering in transparent processes and speedy execution. The ISO certification was an integral part in this strategy. The certification, Kumar says, has transformed the corporation. All NSIC offices are now ISO certified, so that all processes are transparent and monitorable real-time.
For building volumes, NSIC has entered into MoUs with 58 small industry associations, ?which represent 60 to 70% of MSMEs?. Between 50,000 and 1,00,000 units buy raw material from NSIC a month, while its B2B portal has a hit rate of 80,000 a month. The corporation is in the process of upgrading the portal to take on China?s B2B portal, Alibaba.com, and is coming out with an exclusive IT software for small businesses.
NSIC has signed a memorandum of understanding with the government this year that envisages 40-50% increases in business turnover and profits. That will take the corporation?s revenue above the $2-billion mark. Kumar is confident that the momentum he has built up will take care of the ambitious annual targets. And he reminds us that NSIC?s achievements, as a pure-play services company in the public sector and low-cost provider of services in tune with with policy objectives, are commendable. We are in full agreement, Mr Kumar.