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FE Exclusive: TReDS platform RXIL turns profitable on the back of rising transaction volume

Credit and Finance for MSMEs: Among the three TReDS exchanges, RXIL’s CEO Ketan Gaikwad said it is the first one to break even and turn around.

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There are three TReDS platforms licensed by RBI to operate: RXIL, M1xchange, and Invoicemart.

Credit and Finance for MSMEs: Mumbai-based Receivables Exchange of India (RXIL), the invoice discounting platform for MSMEs, has announced that it has turned profitable in the current financial year.

“Among the three TReDS exchanges, I would say that we are the first one to break even and turn around. From this year onwards we are seeing profitable growth,” Ketan Gaikwad, MD and CEO, RXIL told Financial Express Aspire (formerly Financial Express SME).

Trade Receivables Discounting System (TReDS) as a concept was introduced by the Reserve Bank of India (RBI) back in 2014 to address the working capital challenge MSMEs face due to delays in payment from their public and private buyers. Other than RXIL, M1xchange along with Invoicemart (joint venture of Axis Bank and mjunction services) have got the license from RBI to operate the TReDS exchange.  

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According to RXIL – a joint venture between Small Industries Development Bank of India (SIDBI) and National Stock Exchange of India Limited (NSE) – the company turned profitable in the first quarter of the current fiscal, discounting invoices worth Rs 4,760 crore.

The journey towards profitable growth started in the last fiscal when it substantially reduced its loss to Rs 28 lakhs in comparison to Rs 5.27 crore net loss in FY21.

The break-even is based on the transaction volume of invoice discounting on the platform. “Since the direct cost and the fixed cost to operate a TReDS platform remain the same, we generate income by charging a transaction fee from the corporates and the financiers,” said Gaikwad.

The transaction fee on TReDS ranges from 0.25 per cent to 0.5 per cent per annum on the discounted amount. For instance, if the invoices are discounted at 7 per cent interest by the bank for 90 days, then an additional transaction fee for 50 basis points will be added which will be prorated according to the number of days left for repayment (For 90 days, 12.5 per cent basis points will be added). 

The growth in transaction volume is on the back of corporates leveraging TReDS to discount invoices for their MSME suppliers, said Gaikwad. “Corporates are using the platform because of the benefits they get as the risk is predicated on their stronger balance sheet as a result of which the rate of interest is lower for them and they are able to support the MSMEs also.”

The exchange said it also doubled the value of its invoices financed to Rs 13,500 crore in FY22 from Rs 6,500 crore in the previous year. The company aims to reach about Rs 25,000 crores by the end of the current financial year.  

The increase in transaction volume in FY22 is not relegated to RXIL alone but is seen across all TReDS platforms. According to data by RBI, the value of transactions undertaken on TReDS platforms in FY22 doubled to Rs 34,362 crore from Rs 17,080 crore amid Covid in FY21, and more than tripled from Rs 11,165 crore during FY20 pre-Covid. The overall transaction value on TReDS since its inception in 2017 stood at Rs 69,277.93 crore.

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