IFCI Factors Limited, leading factoring company and
subsidiary of IFCI Limited offered Invoice Financing, Factoring services to the
SMEs and Startups. Invoice Financing / Factoring will generate cash or liquidity
upto 90% of the value of unpaid invoices.
A mechanical engineer by profession Mr. Bikas Kanti
Roy is the Managing Director of IFCI Factors Limited, subsidiary of IFCI
Limited. He also holds the associate membership of Chartered Institute of
Management Accountants (CIMA), UK. Mr. Roy past assignments include association
with Zacks Research Pvt. Ltd., Industrial Investment Bank of India Ltd and
Steel Authority of India Limited (SAIL).
To know more about the IFCI Factors Limited and the Factoring
services, team of Chamber of Startups sat down with Mr. Bikas Kanti Roy, Managing
Director of IFCI Factors Limited. What follows is an edited version of the
conversation.
01. What was the support from the family and what
were the challenges during your career from joining to becoming of MD of IFCI
Factors Limited?
From
my family front, I have been receiving full support. I am staying out of station
away from my family for career progression, which has been possible due to the
support from family.
This
is my second term as MD, IFCI Factors Limited (IFL). During the first term of
my MD-ship, primary challenges were mounting NPA and consequent losses due to
provisioning. In addition, the corporate governance structure, systems and
process were very weak or rather non-existent. So, the primary challenge was to
minimizing NPA. Putting in place appropriate governance structure and
introducing SOPs and appropriate credit culture including introduction of new
risk model and doing away with riskier variants of factoring products.
02.
What are your views about the stimulus package announced by the Hon’ble Finance
Minister? Whether the stimulus package is enough for the MSMEs and to revive
the country’s economy? The role of Factoring is very important to support and
revive the MSMEs’ How IFCI Factors sees this opportunity?
Rs.20
Lac Cr stimulus package announced by FM is primarily in form of non-cash
component but providing adequate liquidity in systems through Banks/FIs and
other channels. So, it basically has minimum impact on fiscal front. Through
guarantee provided by GOI for MSME loan and fully or partially guaranteed loan scheme
for NBFCs, etc. would increase the Govt.’s contingent liabilities
.
Collateral
free automatic loan of Rs.3 lac cr to standard MSME – these loans have been a tenure
of 4 years to be availed by October 31, 2020 and do not need any collateral and
banks/NBFC extending this credit are to be provided 100% credit guarantee
cover. This would likely to help at at-least 45 lacs MSME units.
The
other measure is Rs.20 K Cr sub-date to stress MSME. This will help at least 2
lac MSME to augment their much needed equity capital, as, this will be treated
as equity.
Thirdly,
Rs.50 K Cr is proposed to be infused by an equity to MSME through fund of funds
scheme of SIDBI for which details are yet not cleared.
Fourthly,
the Govt. has redefined the MSME enterprise and the investment as well as
turnover threshold has been increased and both manufacturing and services
sector have been kept at par. This will
improve the ambit of enterprises having various benefits under MSME schemes.
Though,
these measures will definitely help large number of SMEs, however, pandemic is
yet to be over and lot of issues involving supply chain management,
remobilization of migrant labors etc. are likely to impact the smooth running
of MSMEs, so, it is quite premature to comment on the sufficiency of stimulus
package so as to bring the economy back on track.
The
prospect of any kind of lending including factoring depends on state of
economy. IFCI FACTORS LIMITED is already into this business for last 2 decades
and assets are grown significantly from initial years. For MSMEs, factoring is
the ideal kind of lending opportunity as most of the MSMEs do not get adequate
financing or no financing at all from formal lending channels like banks/FIS.
There are more than 55 million MSME in country out of which only around 1
million is funded with formal sector of funding. So, opportunities are immense,
provided appropriate structuring can be done suitably for MSME.
03.
How IFCI Factors Responds to this
epidemic? To what extent IFCI Factors prepare for any economic changes? Whether
IFCI Factors introduced different products?
While
IFCI FACTORS LIMITED followed the Covid 19 related guidelines announced by GOI
and Govt of Delhi/ NCR from time to time, it continued to do routine activities
including funding to existing clients, working from home and through concall or
video conferencing etc. IFCI FACTORS LIMITED is continuously keeping a watch on
pandemic situation and accordingly policies are being framed to address the
changing demand pattern and requirements. New product will be introduced in
course of time and once approved by Board, the same would be intimated to stakeholders.
04.
What is Factoring? Please five brief about working of IFCI Factors Limited? How is factoring
beneficial to an MSME/Startups compared to traditional bank products like Cash
Credit?
Factoring
is an ongoing arrangement between the client and the factor, where the sales of
goods and services are made on open account terms and the invoices for the same
are assigned to the factor regularly for the purpose of funding, collection and
sales ledger administration. Advances are made to the client based on agreed
prepayment percentages on submission of invoices. Balance payment is made on
the receipt of payment from the buyer.
IFCI
FACTORS LIMITED remains committed to provide the liquidity support (funding) to
MSMEs within period of 30 days - Bikash Kanti Roy
05. How is factoring beneficial to an exporter
compared to traditional bank products or credit insurance?
Export
factoring is very safe product the way IFCI FACTORS LIMITED does. We being the member
of FCI, get cover on export amount through our corresponding factor to
importing countries who also get it credit insured. These correspondent factors
being very large institutions and FCI being the nodal agency, probability of
default is very very low. This mechanism through FCI minimizes the cost of
insurance v/s banks who can not avail the facility, since
they are not members of FCI.
06.
What is import factoring and how has it picked up in India and to what
extent?
Import factoring is a financial service that
enables you to purchase goods from your overseas supplier on short term credit
of upto 180 days on open account terms without the need for opening a letter of
credit (LC). Import factoring has not been very popular mode of financing. Import factoring in India has not taken off in
India as its fee based service wherein the primary task is underwriting
the risk of the buyer (importer) and collection activities. Assuming
the credit risk of buyer/ importer is something which has been the
domain of large MNC credit insurance companies ( Atradius,
Euler Hermes, Coface etc)
07.
Government on release of Economic relief package urged to strengthen the supply
chain management. Receivables management and supply chain finance for MSMEs is
a major challenge? How IFCI Factors can strengthen the supply chain management?
IFCI
FACTORS LIMITED as FI does not have direct contribution towards supply chain
management of companies. However, necessary liquidity is provided once material
is supplied or received by other companies with due acknowledgment.
This Story is being edited by Mr. Sandeep Bisht, Advisor, Chamber of Startups, Industries and Entrepreneurs (India) Council. If you have a Success Story of your business, please write an email to us at media@indianstartupchamber.com or contact Mr. Ashutosh Sharma at 9999500137.
IFCI Factors Limited, leading factoring company and
subsidiary of IFCI Limited offered Invoice Financing, Factoring services to the
SMEs and Startups. Invoice Financing / Factoring will generate cash or liquidity
upto 90% of the value of unpaid invoices.
A mechanical engineer by profession Mr. Bikas Kanti
Roy is the Managing Director of IFCI Factors Limited, subsidiary of IFCI
Limited. He also holds the associate membership of Chartered Institute of
Management Accountants (CIMA), UK. Mr. Roy past assignments include association
with Zacks Research Pvt. Ltd., Industrial Investment Bank of India Ltd and
Steel Authority of India Limited (SAIL).
To know more about the IFCI Factors Limited and the Factoring
services, team of Chamber of Startups sat down with Mr. Bikas Kanti Roy, Managing
Director of IFCI Factors Limited. What follows is an edited version of the
conversation.
01. What was the support from the family and what
were the challenges during your career from joining to becoming of MD of IFCI
Factors Limited?
From
my family front, I have been receiving full support. I am staying out of station
away from my family for career progression, which has been possible due to the
support from family.
This
is my second term as MD, IFCI Factors Limited (IFL). During the first term of
my MD-ship, primary challenges were mounting NPA and consequent losses due to
provisioning. In addition, the corporate governance structure, systems and
process were very weak or rather non-existent. So, the primary challenge was to
minimizing NPA. Putting in place appropriate governance structure and
introducing SOPs and appropriate credit culture including introduction of new
risk model and doing away with riskier variants of factoring products.
02.
What are your views about the stimulus package announced by the Hon’ble Finance
Minister? Whether the stimulus package is enough for the MSMEs and to revive
the country’s economy? The role of Factoring is very important to support and
revive the MSMEs’ How IFCI Factors sees this opportunity?
Rs.20
Lac Cr stimulus package announced by FM is primarily in form of non-cash
component but providing adequate liquidity in systems through Banks/FIs and
other channels. So, it basically has minimum impact on fiscal front. Through
guarantee provided by GOI for MSME loan and fully or partially guaranteed loan scheme
for NBFCs, etc. would increase the Govt.’s contingent liabilities
.
Collateral
free automatic loan of Rs.3 lac cr to standard MSME – these loans have been a tenure
of 4 years to be availed by October 31, 2020 and do not need any collateral and
banks/NBFC extending this credit are to be provided 100% credit guarantee
cover. This would likely to help at at-least 45 lacs MSME units.
The
other measure is Rs.20 K Cr sub-date to stress MSME. This will help at least 2
lac MSME to augment their much needed equity capital, as, this will be treated
as equity.
Thirdly,
Rs.50 K Cr is proposed to be infused by an equity to MSME through fund of funds
scheme of SIDBI for which details are yet not cleared.
Fourthly,
the Govt. has redefined the MSME enterprise and the investment as well as
turnover threshold has been increased and both manufacturing and services
sector have been kept at par. This will
improve the ambit of enterprises having various benefits under MSME schemes.
Though,
these measures will definitely help large number of SMEs, however, pandemic is
yet to be over and lot of issues involving supply chain management,
remobilization of migrant labors etc. are likely to impact the smooth running
of MSMEs, so, it is quite premature to comment on the sufficiency of stimulus
package so as to bring the economy back on track.
The
prospect of any kind of lending including factoring depends on state of
economy. IFCI FACTORS LIMITED is already into this business for last 2 decades
and assets are grown significantly from initial years. For MSMEs, factoring is
the ideal kind of lending opportunity as most of the MSMEs do not get adequate
financing or no financing at all from formal lending channels like banks/FIS.
There are more than 55 million MSME in country out of which only around 1
million is funded with formal sector of funding. So, opportunities are immense,
provided appropriate structuring can be done suitably for MSME.
03.
How IFCI Factors Responds to this
epidemic? To what extent IFCI Factors prepare for any economic changes? Whether
IFCI Factors introduced different products?
While
IFCI FACTORS LIMITED followed the Covid 19 related guidelines announced by GOI
and Govt of Delhi/ NCR from time to time, it continued to do routine activities
including funding to existing clients, working from home and through concall or
video conferencing etc. IFCI FACTORS LIMITED is continuously keeping a watch on
pandemic situation and accordingly policies are being framed to address the
changing demand pattern and requirements. New product will be introduced in
course of time and once approved by Board, the same would be intimated to stakeholders.
04.
What is Factoring? Please five brief about working of IFCI Factors Limited? How is factoring
beneficial to an MSME/Startups compared to traditional bank products like Cash
Credit?
Factoring
is an ongoing arrangement between the client and the factor, where the sales of
goods and services are made on open account terms and the invoices for the same
are assigned to the factor regularly for the purpose of funding, collection and
sales ledger administration. Advances are made to the client based on agreed
prepayment percentages on submission of invoices. Balance payment is made on
the receipt of payment from the buyer.
IFCI
FACTORS LIMITED remains committed to provide the liquidity support (funding) to
MSMEs within period of 30 days - Bikash Kanti Roy
05. How is factoring beneficial to an exporter
compared to traditional bank products or credit insurance?
Export
factoring is very safe product the way IFCI FACTORS LIMITED does. We being the member
of FCI, get cover on export amount through our corresponding factor to
importing countries who also get it credit insured. These correspondent factors
being very large institutions and FCI being the nodal agency, probability of
default is very very low. This mechanism through FCI minimizes the cost of
insurance v/s banks who can not avail the facility, since
they are not members of FCI.
06.
What is import factoring and how has it picked up in India and to what
extent?
Import factoring is a financial service that
enables you to purchase goods from your overseas supplier on short term credit
of upto 180 days on open account terms without the need for opening a letter of
credit (LC). Import factoring has not been very popular mode of financing. Import factoring in India has not taken off in
India as its fee based service wherein the primary task is underwriting
the risk of the buyer (importer) and collection activities. Assuming
the credit risk of buyer/ importer is something which has been the
domain of large MNC credit insurance companies ( Atradius,
Euler Hermes, Coface etc)
07.
Government on release of Economic relief package urged to strengthen the supply
chain management. Receivables management and supply chain finance for MSMEs is
a major challenge? How IFCI Factors can strengthen the supply chain management?
IFCI
FACTORS LIMITED as FI does not have direct contribution towards supply chain
management of companies. However, necessary liquidity is provided once material
is supplied or received by other companies with due acknowledgment.
This Story is being edited by Mr. Sandeep Bisht, Advisor, Chamber of Startups, Industries and Entrepreneurs (India) Council. If you have a Success Story of your business, please write an email to us at media@indianstartupchamber.com or contact Mr. Ashutosh Sharma at 9999500137.
