M1xchange eyes ₹12,000 cr business volumes in 2019-20

This two-year-old platform expects to break-even next fiscal, says CEO Mohindru

M1xchange, a digital invoice discounting platform for Micro, Small and Medium Enterprises (MSMEs), is eyeing business volumes of ₹12,000 crore in 2019-20, as more micro, small and medium enterprises understand the benefits of timely funding provided by such online marketplaces, a top official said.

“Our aspiration is to achieve business volumes of ₹12,000 crore in 2019-20. This fiscal we are at ₹300 crore a month. There is no reason why we cannot scale up to ₹1,000 crore a month next fiscal”, Sundeep Mohindru, Chief Executive Officer (CEO), Mynd Solutions told BusinessLine.

M1xchange, set up by Mynd Solutions in April 2017, is among the three Trade Receivable Discounting Systems (TReDS) — online marketplaces — approved by the RBI to bring together buyers, sellers and financiers for discounting the MSMEs invoices.

Mohindru said M1xchange hopes to close the current fiscal with business volumes of at least ₹2,500 crore. “We have processed volumes of about ₹1,700 crore. In next two months, the number of large corporate buyers are expected to go up by 80, taking the overall count of corporate buyers to 180,” he added.

As on date, nearly 1,000 MSMEs are registered with M1xchange and as many as 25 banks and non-banking financial companies (NBFCs) are on board. A salient feature of this platform is that digital signature is a must for every transaction, Mohindru said. As many as 10 central public sector enterprises are using this platform. Talks are also on with State government promoted entities to see if they can also come on board, he said.

Mohindru said that most part of 2017-18 — where it transacted a business of just ₹300 crore — was spent on convincing banks that the platform was secure and the whole structure is legally valid. Now, there is acceptance of the system for the platform and the entire concept.

“Everything is digital. Banks had no bilateral paperwork with suppliers. The entire recourse for banks in case of payment default is on the buyer,” he said.

TReDS allow MSMEs to post their receivables on the electronic platform and get them financed. This not only gives them access to finance, but will also put greater discipline on corporates to pay their dues on time.

How it works

A MSME supplying goods and services to a large corporate has a receivable from that large company. It can put the invoice on the exchange. The large corporate will accept the invoice and accept to pay on, say, the 60th day, as per the credit terms. The banks on the exchange will then bid to discount that invoice. Besed on the best bid, the MSME will get instant payment which will be made by the corporate to the bank. The rate of interest it will get is based on the goodwill of the large corporate. In this process, banks are essentially taking a credit risk on the large corporates and not on the MSME.
The MSME is out of it as it is selling the receivable to the bank. There is bidding and so the process is transparent. The other benefit for banks is that they don’t have to source the business, have a relationship manager or a branch as everything is digital.

Virtual mind

Mohindru said M1xchange was looking to address the problems of MSMEs at a holistic level. It has launched a helpline for vendors by the name ‘Virtual Mind’, which will help MSMEs in income tax, GST and other compliances. It would also assist in HR, finance, technology and IT needs of MSMEs he added.

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