IFCI's Manoj Mittal Ignites Quest For Equitable Access To Capital
In a dynamic discourse about the Indian financial ecosystem's impact on micro, small and medium enterprises (MSMEs), Manoj Mittal, the MD and CEO, IFCI on Thursday delved into the vital issue of equity accessibility and shed light on the existing challenges and potential pathways to empower MSMEs in their quest for growth.
Speaking at the BW Emerging Business Summit & Awards, Mittal addressed the perplexing question of how to attain equity access in an environment where it seemingly remains scarce. He acknowledged that equity is already significantly available, particularly among bankers.
However, he emphasised the critical concern that, when equity is at hand, how can projects be rendered viable? For this, he underscored prominent sources within the country, namely startups, which are experiencing substantial funding traction; private equity and venture capital, which are increasingly relevant and significantly benefiting MSMEs.
Mittal noted that this extends beyond innovation-driven startups, encompassing growth-oriented MSMEs and basic startups seeking investments ranging from a few lakhs to 10 or 20 lakhs.
Reflecting on the past, Mittal discussed the limitations of prior models such as the seed capital scheme of IDBI and international equity funds, which failed to yield notable success. In the present landscape, he observed the absence of a dedicated model for seed funding.
Turning to growing MSMEs, Mittal highlighted the closure of the TCI tool, leaving BSE and NSE SME platforms as the remaining options. He indicated that the number of listed entities had risen from 14 in 2012 to approximately 109 in 2022, yet this figure remains modest compared to the country's extensive MSME count.
“Among these, only about 100 have been listed, raising a total of 2000 crores, whereas the requirement approaches 100 lakh crores. Essentially, approximately 800 MSMEs are listed on the MSME stock exchange,” he added.
Transitioning from bootstrap strategies, Mittal underscored the significance of both debt and equity in nurturing growth. "Equity, often a precursor to debt-raising, plays a pivotal role. While family contributions are vital, external sources are imperative to augment equity," he added.
He stressed the necessity to amplify the existing platform, given that the money supply appears less restrictive, especially in stock markets. He noted oversubscription trends in SME IPOs and highlighted success in the food processing and energy sectors. Yet the crux of the matter is MSME readiness, their capacity to absorb funds and meet the prerequisites for listing. Preparation and timing, Mittal asserted, are the cornerstones for effective public exchange listing.
Moving forward, Mittal posed a pivotal question, "Is the current progress adequate?" Citing data from FY 19, sourced from the Sidbi MSME pulse report, he revealed that outstanding MSME credit increased from Rs 19 lakh crore in 2019 to Rs 28 lakh crore in 2023. This 10 lakh crore growth over five years reflects an 11 per cent Compound Annual Growth Rate, outstripping overall credit expansion. However, the underlying inquiry pertains to sufficiency.
Notably, studies projected a total demand of 160 lakh crore, with around 60 lakh crore being the addressable debt demand, surpassing existing credit figures. The crucial factor lies in equity accessibility, an issue currently hindering numerous MSMEs from obtaining financing.
Mittal concluded by advocating for educational platforms that empower MSMEs to prepare for and secure external equity. He asserted that such measures would foster collaborations with banks, NBFCs, and other formal financial institutions. Ultimately, the narrative highlighted the paramount role of equity in shaping the MSME landscape and the imperative need to address its accessibility.
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