Spreading power among SMEs
Like most fintech companies, Power2SME has also found its niche. The company which was established five years back has more than 50,000 clients in the MSME segment. This finance facilitator has a large base of small and growing businesses and it has used
Could you profile Power2SME in activity terms—product range, database size and footprint, and current revenue and targets?
Our product catalogue includes chemicals, additives, inks, paints, metals, polymer commodities and engineering polymers. While our buyers come entirely from the MSME sector, our suppliers include large players like SAIL, TATA Steel, ESSAR Steel, Allied Strips, JSW, Rathi Steel, Victor Exim, Balaji Enterprise, POSCO Steel, Apollo Pipes and JSL. We buy directly from the large players and sell to the MSMEs with a margin. Today, Power2SME has a registered MSME database of 50,000 companies across 14 states – Delhi, Uttar Pradesh, Punjab, Haryana, Himachal Pradesh, Uttarakhand, Rajasthan, Gujarat, Chhattisgarh, Tamil Nadu, Maharashtra, Karnataka, West Bengal and Orissa.
Our revenue stands at Rs 1,080 crore in FY2017, and have achieved profitability. Our investors enable us with their energy and market knowledge.
We aim to be a USD 1 billion company serving 60,000 customers. We hope to broaden our portfolio and deepen our relationships through technology and transformation camps, via MoU with the Foundation of MSME clusters. These camps provide connect to thousands of SMEs pan-India and educate them about aspects of technology upgradation, raw material procurement etc that they can leverage with our help to enhance their growth.
What is the estimate of total SMEs and how many in these are unbanked?
India has the second largest SME base in the world with 51 million SMEs. As per IFC, the total financing demand in the SME sector is of Rs 32.5 trillion. Though the Mudra scheme has seen Rs 1.44 lakh crore disbursed so far in two years, still much needs to be done. The gap in funding access has seen the emergence of many fintech players in the lending space and this will only intensify in the near future.
What kind of organic growth are you trageting for over next 34 years?
Right now, the number of SMEs taken on board by fintech players are small in percentage. But we will see growth of fintech companies in the lending segment due to a number of factors like high credit demand; push for digital ecosystem; increase in acceptance of digital transactions; customised credit products and above all processing speed. These factors have led traditional banks to partner with fintech players to reach out to SMEs.
Here an anomaly seen in case of service sector SMEs are plentiful. In this case, low operational costs tend to get them to profitable zone sooner, and at the same time as borrowers, they find it difficult to meet lenders’ collateral criteria.
Can you elaborate on your value proposition in the SME quest for better quality finance?
Given the fact that raw material is around 70 per cent of the recurring costs of manufacturing SMEs, they are at the receiving end of an unstructured market and inaccessible quality finance which are pressing issues for majority of SMEs since long. Power2SME is creating a digital ecosystem enabling SMEs to access raw materials and finance/credit on tap. Adding to it, we have also created niche digital platforms for industrial buying and financial requirements SMEShops.com and FinanSME.com. Our online lending platform, FinanSME provides SMEs with easy access to financial institutes, with focus on small-ticket lending, loan customisation to suit requirements and quicker processing because time is always a critical factor.
Power2SME brings about a difference in quality, pricing (procurement of raw materials, credit interest rates), services (online market place to buy and sell, and working capital requirements through our tie ups with lenders) to manufacturing SMEs. We positively impact business efficiency, productivity, production cost and finally the profit margins.
Our value proposition to SME is lower material cost, improved access to bank finance at cheaper cost, a large marketplace to list their products and a GPS-backed transparent delivery system. The price advantage that we offer ensures that the SMEs can focus on their core business of driving growth and expansion, while we take on the role of sourcing multiple inputs at the most competitive price points, and with flexible payment options.
For large suppliers, we provide a fillip to their institutional sales with better working capital management (we give payments on the spot and receive the credit in 45 days), and the comfort that their incremental sales come with very low cost of client servicing. To financial institutions, we offer access to creditworthy SMEs who have passed our robust accreditation test, and their complete transaction history with Power2SME, at a negligible cost of customer acquisition. Power2SME has established a sturdy internal rating system and each customer is evaluated on the basis of parameters which range from basic KYC to the entire payment behaviour. On the first scrutiny, each customer is given a score and there is a minimum threshold score that a SME needs to meet before he is on board. There is a similar subsequent appraisal before the customer is put up for a borrowing proposal.
In your view, how will GST impact your business?
With GST, India has become a single market and it will increase our reach. Also more SMEs will get into the formal economy, and boost our target group significantly. We believe the procedures will be simpler as multiple levies will be subsumed under GST. Likewise, we believe shipment costs will get rationalised and will benefit our clients and us.
What is next for Power2SME?
Our vision is to bridge gaps in the SME industry with technology at the core of whatever they do. We are integrating technology into SMEs’ daily operations to streamline operations in finance, operations, human resources and customer or supply chain management, minimising repetitive or wasteful activies. Power2SME is also working on digital wallets for SMEs, at a level much different from the current B2B or B2C wallets. We would share complete details, at the time of its expected launch, shortly.