India’s micro, small and medium enterprises (MSME) sector is expected to rebound with a 15% to 17% growth in revenues for the financial year ending 2022 amid the country’s economic recovery and an increase in consumer demand. The report, titled, ‘MSMEs back to the grind’, is jointly conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) with CRISIL. “Amidst the global pandemic, India has found its innate strength to brave the storm and focus on developing its domestic ecosystem, to support both the Indian and the global markets,” said Mr Deepak Sood, Secretary General, ASSOCHAM.
KPIs for Indian MSME Sector:
- Smartphone penetration – 54% in 2020. Expected to reach 96% by 2040
- Internet penetration – 41% in 2019
- Increasing social media usage – above 50% in 2020, expected to reach 67% by 2025 – social media increases customer awareness and acts as a platform for digital advertising for MSMEs
- Increasing UPI transactions
- 15 Cr. active monthly users.
- In May 2022, almost 600 Cr. transactions worth almost INR 10.4 Lakh Crores were done.
- 43% of all UPI transactions by volume and 20% by value were P2M in May 2022.
- Shift to digital infrastructure
- There were a total of 7.5 Cr. credit cards and 92 Cr. debit cards in India in April 2022
- Digital lending – new platforms coming to target semi-urban/rural MSMEs
Money Transfer Flow:
RBI → Banks → NBFCs → Startups → Customers
- As we move forward, the interest rate/cost of capital keeps on increasing, as each financial intermediary is taking its own cut in between.
- Rather than directly giving out loans, banks forward the money to NBFCs/startups which offer comparatively riskier loans with less credit data availability.
- If banks themselves have the data with them, they would directly lend to customers at a much lower interest rate, hence making it easier to finance the loans. Hence the adoption of digital services in businesses is very important.
Average MSMEs debt demand is INR 69.3 Trillion every year, growing at 11.5%+ CAGR for the 63.4 M MSMEs in India. Different business models like Supply Chain Financing (or Invoice Discounting), Revenue Based Financing, P2P Lending, Digital Bookkeeping and Accounting Software have gained traction in India in recent years.
Some emerging players as per their business models:
|Sector||Name||Founded Year||Overview||Total Funding (in Million USD)||Company Stage||Annual Revenue (in Million USD)||Latest Valuation (in Million USD)|
|BC Agents / Agent based payment solutions||Sub-K||2010||Agent-based payment solutions to marginalized sections||13.01||Series C||16.85||74.63|
|RapiPay||2009||Agent-based payment solutions for businesses||24.00||Acquired||24.10||73.72|
|Eko||2006||Software for correspondent bankers||8.57||Series A||15.20||20.40|
|Roinet||2012||Agent-based payment solutions||2.20||Seed||14.48||14.82|
|Corporate Card||EnKash||2016||Corporate spend management and cards fintech||23.50||Series B||3.51||84.07|
|Karbon||2019||Corporate cards and banking solutions for businesses||32.00||Series A||0.05|
|Invoice Discounting||KredX||2015||Integrated cash flow solution provider||33.03||Series B||2.47||155.89|
|Vayana Network||2009||Online trade financing platform||61.58||Series C||3.84||142.91|
|P2P Lending + Marketplace Lending||Indifi||2015||Online platform for business loans||62.06||Series D||8.71||110.16|
|Ziploan||2015||App-based lending platform for business loans||19.09||Series B||5.44||48.96|
|Reolving Line of Credit||Capital Float||2013||Online platform for consumer & business loans||203.93||Series D||19.50||197.62|
|GetVantage||2019||Online platform for revenue-based financing||5.52||Seed||0.06||10.00|
|Working Capital Loans||Veritas Finance||2015||Provider of working capital loans for small businesses||184.68||Series F||34.16||544.71|
Funding by Sector:
|Funding in 2021 (in USD Million)|
|Sector||Seed Stage||Early Stage||Late Stage||Total|
|Supply Chain Financing||1.8||33||38.1||72.9|
|Working Capital Loans||–||25.1||832||857.1|
|Agent based payment solutions||0.5||13.2||9.52||23.22|
|Revenue Based Financing||20.3||20||–||40.3|