India launches SME stock trading platform to boost financing

THE INDIAN government announced it would be allowing state-run companies to use the Trade Receivables Discounting System (TReDS), an emerging trading platform that is specifically designed for small and medium-sized businesses. With solid backing from the Indian government, TReDS is expected to take off fully within the next three years.

TReDS is the brainchild of former Reserve Bank of India (RBI) Governor Raghuram Rajan, who designed the system to facilitate the financing of trade renewables of SMEs from corporate buyers, as noted by M1 Exchange on its official website. This is done through invoice financing by several affiliate financiers. By doing so, TReDS can augment the trade account receivable management of SMEs across India.

So far, the advantages of utilizing TReDS is pretty evident. Over the past three months, Invoicemart, a financial firm backed by Axis Bank, fully embraced the TReDS platform. By doing so, Invoicemart was able to discount as much as INR1,300 million (US$20 million) worth of invoices from SMEs.

In a statement to The Economic Times, Invoicemart managing director Kaylan Basu described how much the TReDS platform had benefited SMEs in the country.

“We have already discounted more than 4,000 invoices on the platform worth INR1,300 million (US$20 million). We have also onboarded 180 participants, of which, 160 are SME sellers, and the rest are buyers and financiers. This initiative is a huge enabler for SMEs because financing happens in a transparent manner, is without collateral and they can get the best possible rates,” Kaylan said, according to an ET report.

Invoicemart is not the only financial firm that is reaping the benefits of the TReDS platform, however. During the past three months, fellow financial company M1 Exchange, which is backed by Mynd Solutions, managed to discount as many as INR750 million (US$11.6 million) worth of invoices from SMEs.

M1 Exchange founder Sundeep Mohindru is optimistic about the future of the TReDS platform and Indian SMEs as a whole. In a statement to The Economic Times, the M1 Exchange executive described how SMEs in the Asian nation eventually adopted the TReDS platform.

“We had approached some PSUs before this notification came. While they found it interesting, they were not sure whether they could route their vendor payments through the TReDS portal. But now, they can adopt TReDS openly,” Sundeep said, according to ET.

While still sailing on uncharted waters, the TReDS platform has managed to get a lot of support from the Indian government. On Oct 24, the government announced that it would be mandatory for all major public sector units to register on the TReDS platform within 90 days.

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