M1exchange, one of the three exchanges on the TReDS platform, has just begun offering a facility for discounting of export bills, the company’s CEO, Sundeep Mohindru, told businessline today. The facility will be offered from GIFT city, which is a financial hub where the globally benchmarked regulations and taxation are different than in the rest of India. 

The offering means that if you are an MSME exporter, you could get your receivables discounted at the Centre —a bank will buy your dues from the company that imported your goods or services, fetching you immediate cash. 

The TReDS platform (for Trade Receivables electronic Discounting System), was brought in by the RBI in 2017. Today, TReDS comprises’ three exchanges including M1exchange (and Receivables Exchange of India, which is a joint venture of SIDBI and NSE, and Invoicemart), where an MSME can offer to sell its receivables; the receivables will be bought by one of the 60 banks that are participating on TReDS.

After initial hiccups, which was mainly due to banks’ hesitation to undertake the risks that they did not evaluate by themselves, TReDS has becoming increasingly popular since 2021. Today, over 100,000 MSMEs (sellers) and 4,000 large companies (buyers of MSMEs’ good and services) and 60-odd banks are active on one or the other of the three TReDS platforms.  

In her recent Budget speech, the Finance Minister, Nirmala Sitaraman, enlarged the scope of TReDS by reducing the threshold of buyers for mandatory onboarding on the TReDS platform from ₹500 crore to ₹250 crore, a measure that would bring 22 more central public sector undertakings and 7,000 more companies to the platform. 

Mohindru said that TReDS, where the transaction volumes have been rising both in value and number since 2021, would only boom. At present, MSME receivables worth about ₹20,000 crore are bought by banks every month, he observed. He said that about ₹2 lakh crore worth of transactions would happen on TReDS in 2024-25.  

Going deeper 

In January 2024, M1exchange (which is owned by Mynd Solutions Pvt Ltd, which was set up by Mohindru and a few others), started ‘deep tier financing’. This is a facility where banks will buy the receivables of tier-2 MSMEs, who supply to tier-1 MSMEs. Here, the tier-2 MSMEs become the sellers of the receivables. Five financiers have been onboarded for this – RBL, HSBC, IDFC Bank, Yes Bank and Tata Capital. M1exchange has onboarded 1,000 MSMEs and their 2,000 suppliers so far. 

M1exchage, which gets paid a fee for every transaction, achieved a turnover of ₹60 crore last year; it expects the number to rise to ₹100 crore this year. “We have always been profitable,” Mohindru said. An IPO is on the cards, which Mohindru says could happen in “two to three years”. 

Related Topics