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M1xchange eyes doubling customer base, transaction value of Rs 30K cr in FY23

M1xchange, an online platform for discounting trade receivables of MSMEs, is targeting to double its customer base and hit transaction value of Rs 30,000 crore in the next fiscal year, as the market has huge growth potential, the company’s top official said.

The invoice discounting of the due payments of MSMEs (micro, small and medium enterprises) was allowed by the Reserve Bank under the Trade Receivables Discounting System (TReDS) in 2015.
Under this facility, banks pay for the invoices which are due on MSMEs from their customers such as private companies and government PSUs, thus providing them the much required cash flow on time to grow their businesses.
“This platform is meant for the benefit of small and medium enterprises. We are basically taking the receivables of the MSMEs and doing a credit profile of their customers (corporates, PSUs) and basis the risk of their customers, we are discounting their invoices and making the payment immediately through
 this platform.
“On the due date, we are collecting the payment from the customer (of the MSME) and paying it back to the bank which has discounted the (invoice), so this is how it works,” Sundeep Mohindru, CEO of M1xchange told PTI in an interaction.
This is a new age transaction banking model, which is specifically a short-term funding, Mohindru said.
“It has nothing to do with the balance sheet and project of the MSME, it is different from project loan, term loan, housing loan. This is for a specific transaction or specific order. The most important thing is that an MSME is reducing its risk,” he said.
M1xchange has onboarded 11,000 MSMEs on its platform so far since beginning its operations in 2017.
“Next fiscal we propose to onboard 22,000-23,000 MSMEs on our platform. And we propose to have discounted volume worth Rs 30,000 crore for the year (FY23). This year we are likely to finish anywhere between Rs 12,000-13,000 crore (transaction value),” the official said.
MSMEs from as many as 900 cities across India can access M1xchange platform digitally. Besides, the company provides assistance in as many as 16 vernacular languages to MSMEs for their smooth onboarding.
Mohindru said, typically the discounting value ranges from Rs 50,000-Rs 3 crore on the platform. When asked about the company’s revenue model, the official said it is a variable fee-based income charged as a very small percentage of the transaction value.
He said TReDS facility is a win-win proposition both for MSMEs and banks. Small and medium enterprises get their payments on time. For banks, it reduces the cost of customer acquisition, as KYC and onboarding is done by the exchange.
It also helps the lender access new customers. For MSMEs, it is more beneficial because if they go to a bank for a working capital loan, it will require collateral and other things. However, here their balance sheets, CIBIL scores, past financial performances, nothing is evaluated.
On the TReDS platform, they get the payments of their dues immediately from banks, which otherwise takes 30-90 days from their customers directly.
However, he raised concerns that the participation from the PSUs is very small on the TReDS platform.
“We get a lot of MSMEs who are serving the PSUs and their invoices have to be discounted. However,

we struggle to get the invoices approved from the PSUs. The private sector approves it very swiftly. And out of the business that we have done in the current year, 98 per cent is from the private corporates, and only 2 per cent is from the PSU corporates,” Mohindru said.
Presently, M1xchagne has 44 banks on its platform and it plans to add 15 more in FY23. Also, it is in the process of onboarding around 18 NBFCs, as the RBI has recently allowed NBFCs to be part of the TReDS business.
As of now, TReDS facility is available for domestic invoice discounting. However, RBI has recently allowed such a facility for import-export invoice discounting as well, which have to be operated from GIFT City, Gujarat.
M1xchange has already set up a subsidiary to facilitate import-export invoice discounting. “We plan to commence operations of our subsidiary from GIFT City by May,” he added. (PTI)