Editor’s Note
Defind started its operations in India in 2017. It’s primary focus remains the defence sector. Defind’s areas of business include a wide range of products that it either procures from OEMs or are manufactured through its joint ventures. Dr Shirish M Gupte Founder & CEO and Col Sanjiv Kumar (Retd) Founder & COO interacted with Brig SK Chatterji (Retd) Editor, Bharatshakti on issues that ranged from Defind’s business model to impediments that MSMEs face in the current business climate.
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Question: What’s your business model? What are the focus areas of Defind’s operations? What is your product range and primary customer segment?
Answer. Our Business model is based on a unique concept of “Most Appropriate in Class” products. The Indian military and para-military forces work within budget constraints. We look for a good fit between required specs for products and price to identify “Most Appropriate in Class” products.
Our structure is a “Hub and spoke model” with focus on client servicing (Defence forces) as the hub being developed in Defind and manufacturing JVs / OEMs at the ends of the spokes for product delivery. The manufacturing JVs can be both sub-contracted or with significant ownership of Defind.
Our focus areas include weapons and ammunition, ballistic protection technology, body armor and vehicle up-armoring, Inflatables , assault crafts, RIB collars, life boats and life jackets, unique shelters, fire-proof shelters, ammunition storage.
Question. How do you train and skill your workforce?
Answer. For senior personnel we look at ex-armed forces veterans for domain knowledge as well as client culture. The Company’s work culture is explained as part of the induction training. As regards specific training on products, it is on the job and with the help of the OEMS. Junior personnel are from different areas and trained on the job.
Question: What are the challenges in the procurement process that you feel require attending to in order to provide a good environment for Startups and MSMEs to grow?
Answer. The procurement process is very long especially in the areas of equipment purchases. This makes it difficult to hold prices. In many instances we have encountered single vendor situations after multiple bids, but a single successful equipment during Field Evaluation Trials. This either results in cancellation of tenders or further prolonging of the procurement process due to requirement of additional approvals. It is very difficult for SMEs to repeatedly bring equipment for trials.
The flexibility in repeat order placement is very limited. Even if the same equipment is required there are only two options. If the tender notice has a clause for additional procurement at same price a 50% additional order can be placed. This, however, is restricted to the particular command procuring the equipment. Generally, if the repeat order is not placed immediately, it leads to re-tendering. This requires repeat of the Field Evaluation Trials. MSMEs find it financially difficult to go through the process again and again, also the OEM loses interest if the period is very long.
Question: The Finance Minister Ms Sitharaman has presented her Interim Budget – 2024, already. Any issues in the budget that you feel would assist MSMEs and startups. Also, any expectations that have not been addressed?
Answer. The provisions of the budget are expected to increase availability of financial resources and technologies for the MSMEs and startup. However, this will only happen if the various financial institutions loosen their eligibility requirements to avail of the credit. This is not specifically addressed.
Question: What are the challenges MSMEs face in terms of funding support from banks and other financial entities?
Answer. An MSME has limited, if not zero access to Bank financing. The conditions of eligibility make it very difficult to avail of even order financing / bill discounting against confirmed orders/delivery. Ministry of Defence in conjunction with the Ministry of Finance need to enable financing to MSME at least for order funding without the onerous collateral requirements.
A fund channeling OFFSET commitments can be created which can have a portion allocated to funding MSEs in the defence sector which have successfully executed contracts.
Delay in release of the payments by the buyer is another challenge. The bills take very long to be cleared and MSME’s funds get locked in affecting other orders. The MSME Act has provision for penal interest but the Defense and Security Forces do not have any provision to pay for more than the contracted price, so the MSE are forced to accept delayed payments.
