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“Strategic planning and focused execution can transform MSMEs into industry leaders. MSMEs with a profitable and scalable business model can raise capital for their growth without incurring interest burden by launching Initial Public Offering (IPO). By raising capital through IPOs, MSMEs can reduce debt, improve their financial ratios, enhance company visibility, increase valuation of promoters’ stake while retaining ownership of their business. By listing their enterprise, MSMEs can also improve corporate governance and incentivise employees through ESOPs. In India, there are around 6 crore MSMEs, of which hardly around 1000 MSMEs have raised capital through IPOs. More and more MSMEs can consider IPO as an option to raise long term capital for business expansion, debt reduction and working capital needs,” said CA Vivek Chechani, Financial Consultant & MSME Funding Specialist and Founder- Croissance Financial Services Pvt. Ltd. at the Workshop on Modern Funding Options for MSMEs organised by All India Association of Industries (AIAI) and WTC Mumbai.
CA Chechani explained the SEBI regulations and procedures involved in launching IPOs for MSMEs. He said, “The conditions for listing on NSE and BSE are largely same. The entrepreneur needs to convert her business from proprietor or LLP into a limited company, should generate profit for at least 3 years and have tangible asset. The promoter group should have clean track record and a good CIBIL score.”
CA Chechani also informed about other conditions such as maximum limit for paid up capital after IPO and the regulations on usage of IPO proceeds. He said, “The maximum post issue paid up capital should not exceed Rs. 25 crore in the SME platform of stock exchanges. SMEs can use upto 15% of the IPO proceeds for general corporate purpose such as marketing and team building. The remaining amount can be used for repaying debt, capital investment and other purposes. There are restrictions on use of the IPO funds for repaying promoter loans or loans of related parties, while 20% of the IPO fund can be used for exit of existing investors.”
CA Chechani also suggested the ideal amount to be spent on IPO related expenses such as hiring merchant bankers, marketing and regulatory compliances. For an IPO size of Rs. 10 crore -Rs. 20 crore, an SME can spend upto 5% of the IPO size on these expenses, he informed.
Apart from IPO, CA Chechani also explained modes of raising debt funding and supply chain finance for MSMEs such as TREDS platform, Invoice Discounting, loans under various government schemes, namely PMEGP, CMEGP, CGTMSE, Mutual Credit Guarantee Scheme and so on.
During the event, Mr. Mayank Mehta, Branding Expert and founder of Balanced Chemistry explained how MSMEs can adopt branding & marketing strategies for expanding their business and launching a successful IPO. He remarked, “Branding and Marketing are not optional, but essential for MSMEs to scale up. Collaborations amplify reach, reduce risks, enhance credibility, while a strong branding strategy is the backbone of a successful IPO or expansion plan.”
He explained how companies such as Boat grew their business through digital & influencer marketing, while companies such as Paper Boat earned brand loyalty through storytelling & emotional connect and how brands such as Chumbak and Jaipur Rugs strengthened their business through strategic collaboration.
Mr. Mehta suggested that companies with less than Rs. 1 crore turnover may ideally spend 5-8% of their gross revenue on marketing, while companies with upto Rs. 10 crore turnover may invest 10% of their gross revenue on marketing. According to him, companies that are going for IPOs or that are at a rapid growth stage may devote 10-15% of their gross revenue on marketing.
Mr. Mehta pointed out that companies may spend 50-60% of their marketing budget on digital marketing or branding, 15-20% of the budget on content generation, 5-10% on traditional marketing and the remaining 5-10% on customer retention.
He also explained key marketing strategies such as digital advertising, influencer marketing, performance marketing, which are deployed by companies across different sectors to increase returns on marketing investments.
Apart from branding and marketing, Mr. Mehta suggested several other ways through which MSMEs can enhance their brand and market credibility. Specifically, he emphasised on importance of maintaining transparent financial records, securing high credit rating, complying with all government regulations, adopting customer-first approach, enhancing customer experience, inviting customer reviews and investing in customer loyalty programs.
Earlier in his welcome remarks, Dr. Vijay Kalantri, President, All India Association of Industries (AIAI) and Chairman, World Trade Center Mumbai pointed out, “If India has to attain the Viksit Bharat vision of USD 40 trillion economy by 2047 or USD 5 trillion economy by 2027, it has to bridge the credit gap of MSME sector, which faces credit gap of Rs. 25 lakh crore. Government has taken various measures such as increased loan limit under credit guarantee scheme, established corpus for providing equity capital to MSMEs and so on. Still, MSMEs face genuine difficulty in accessing credit.”
Dr. Kalantri pointed out that many MSMEs in Maharashtra have become sick because of lack of access to credit. He suggested the state government to strengthen the financial institution SICOM for enhancing flow of credit to MSMEs at reasonable cost.
Dr. Kalantri also proposed the idea of establishing a task force to devise action plan to bridge the credit gap of MSMEs. He said, “All India Association of Industries (AIAI) and WTC Mumbai will support this task force for the benefit of our MSME members.”
Ms. Priya Pansare, Director – Trade & Investment & Promotion, WTC Mumbai delivered vote of thanks for the event. Ms. Pansare invited MSME exporters for the upcoming Export Conclave, organised jointly by All India Association of Industries, WTC Mumbai and YES Bank on February 21 at Mumbai.
Dr. Vijay Kalantri, President, All India Association of Industries (AIAI) and Chairman, WTC Mumbai felicitating CA Vivek Chechani, Financial Consultant & MSME Funding Specialist and Founder- Croissance Financial Services Pvt. Ltd. at a workshop on Modern Funding Options for MSMEs at WTC Mumbai.