The Paramakudi Engineering Cluster which is an induced cluster was formed during 2018 at Small Industries Development Corporation (SIDCO) Industrial Estate, Ramanathapuram District, Tamil Nadu with 32 Micro- and Small-Enterprises has got old machineries like lathe, drilling machine, welding machine, 40 T power press. Due to the non-availability of the latest machinery, they approached the Ministry of Micro-, Small- and Medium-Enterprises (MSME), Government of India (GOI) and got grant from GOI, Government of Tamil Nadu (GOTN), then they put special purpose vehicle (SPV) contribution, got Term loan from Canara Bank and got latest machinery like shearing machine, laser cutting machine, compressor with drier, Computerised Numerical Control (CNC) press brake, Power Press, Electric Overhead Travelling (EOT) crane etc and put-up Common Facility Centre (CFC). The objective is to study the capacity utilisation (CU) of machineries and service charges (SC) collected and to study on the financial performance of enterprises on revenue generated ( Rg) and gross profit ( Pg) before and after Cluster Development Approach (CDA) in CFC. The methodology was adopted by collecting the above primary data and analysing using Compound Annual Growth Rate (CAGR), descriptive analysis, correlation analysis, trend analysis, regression analysis, structural equation modelling and t-test. The annual average increase in CU of machineries during various time period T from t = 1 to 4 i.e., from 2017-18 to 2021-22 (Tt) is 14.93 % [CU = 9.08 + 14.93 Tt, p = 0.23, R2 = 0.59] and an annual average decrease in service charge collected is ₹107.5 [SC = 1100–107.5 Tt, p = 0.002, R2 = 0.99]. One unit increase in CU leads to 4.4 unit decrease in service charge collected [SC = 1036.29–4.41 CU, p = 0.20, R2 = 0.63]. There is an increase in the mean value of Rg and Pg. By adopting a CDA productivity of Paramakudi Engineering Cluster is increased and also competitiveness of the enterprises in the cluster is increased to move up in the value chain. Due to CDA, MSEs in Paramakudi Engineering Cluster have adopted smart and sustainable manufacturing to reduce cost and increase profit.