RXIL CFO aims to achieve 100% growth in fiscal 2022, CFO News, ETCFO

Kailash Varodia, CFO, Receivables Exchange of India Ltd (RXIL)In an interview with Kailash Varodia, finance chief of invoice discounting platform for MSMEsReceivables Exchange of India Ltd (RXIL), ETCFO explores the challenges before the company’s buyers, sellers and financers ahead of the second wave of Covid.

The company that provides liquidity to MSMEs has seen growth in transaction volumes from Rs 69 crore in April 2020 to Rs 1,105 crore in March 2021 which indicates the revival and resumption of the economic activity, as per the CFO.

The TReDs platform has three key players in its ecosystem — buyers, which are mostly big corporates, sellers, the MSMEs, and financers in the form of bankers and NBFCs.

It is a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India (NSE) and operates the Trade Receivables Discounting System (TReDS) Platform. RXIL has the largest number of financiers on board, which enables financing to over 7,000 MSMEs registered on the platform. Edited Excerpts.

How there been an impact of the second wave of Covid on your business as compared to the first wave?

Kailash Varodia: The country was not expecting a second wave of Covid-19 pandemic, but, sudden rise in caseloads became scary. RXIL saw a decline in the business, which normally we see in the first quarter of any financial year. So, if I compare last year, pre-Covid the transaction volumes (discounting receivables) was around Rs 300 crore and we came down to Rs 70 crore in April 2020. Since then, we have grown almost 180 per cent as compared to the previous year to Rs 1,100 crore till March 2021.

However, this April, we have done around Rs 650 crore plus transactions. There is a decline as the biggest issue nowadays is that when we call any of the clients, corporate or a financer, everyone is somehow facing Covid issues. The previous year, it was a lockdown and some people were busy managing technology or with the operations and everything. This time people are not in their place to do business due to Covid-19.

So, the decline this year is from Rs 1,100 crore to Rs 650 crore which is not as sharp as last year, and by June 2021, we’ll be back to our March 2021 figures.

Will you be able to maintain the Rs 1,100 crore mark from June 2021 onwards?

Yes, the target for FY22 is double of what we have achieved in FY21. Going back to FY20, we had done Rs 2,300 crore of financing. However, when Covid hit the major impact was on the first quarter. But we got back and saw a growth of 180% from Rs 2,300 crore to Rs 6,500 crore.KV

Since October FY 21, we have really maintained the part Rs 800-mark every month for three months continuously and then closed the FY with Rs 1,100 crore.
It is a challenge convincing the buyer or any participant to be part of the platform. Everyone will evaluate the benefit from it, and whether they’ll get the same benefits from existing lenders.
What are the challenges on the financers’ side? Are financers still being very cautious in lending?

KV: Many financiers lend not only to triple rated or double rated borrowers but lower-rated borrowers as well. They understand the requirement of the corporate, MSME sector and I can see the spectrum maturing. Secondly, the rate of interest has come downbecause of the RBI policy. The impact of rate revision has made the platform a competitive playing field for financers.

In this current scenario, we have not seen financers take a step back, in fact, we have more support from financers, encouraging us to add more list of buyers on the platform. Their board is ready to take more exposure on Treds platform, considering the value, as this also qualify for the priority sector lending (PSL) benefit — because it is the financing of the MSME receivables. So this also acts as a parameter to get a PSL benefit.

One of the challenges that RXIL was facing last time was convincing buyers to get registered on the platform. As we have seen around 100 buyers have been added to the list since last year. This was one of the biggest challenges for you. Do you still face a similar challenge?

KV: To be honest, it is a challenge convincing the buyer or any participant to be part of the platform. Everyone will evaluate the benefit from it, and whether they’ll get the same benefits from existing lenders. So, obviously, that will be a challenge but if I compare, we had 489 cumulatively buyers for the last three years.

Last year we have added around 140 buyers but if you see this scenario previously when government-mandated, as compliance, that corporates over Rs 500 crore turnover or PSU department had to get registered on the platform. There are many cases where people have registered for compliance sake, and in this scenario, because now that kitty has reduced, many buyers who joined will get activated. So even though we added 140 buyers, but see the volumes that we have handled.

What are the company’s plans for this financial year? Anything in the pipeline?

KV: To double the targets of FY21 in FY22. We want to achieve 100% growth.

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