Telangana Industrial Health Clinic (TIHCL), the newly formed organisation by the Telangana government for reviving and restructuring micro, small and medium enterprises (MSMEs), has received the Reserve Bank of India (RBI)’s approval to function as a first of its kind co-financing non-bank financial institution (NBFC) for reviving MSMEs. TIHCL, a stressed asset resolution company, will extend bridge loans and advance credit facility to MSMEs. TIHCL will soon be signing memoranda of understanding with BSE and NSE. This will help MSMEs list on the SME platform of the bourses and provide an opportunity for entrepreneurs to raise equity capital for growth and expansion, and for investors to identify and invest in SMEs at an early stage. “We have received RBI approval as the first co-financing NBFC in the country and also the first state-sponsored NBFC with the state contributing Rs 10 crore towards equity,” economist and risk management specialist and adviser at TIHC B Yerram Raju told FE. The state has contributed Rs 10 crore to the proposed Rs 100-crore corpus of the fund, the rest would be funded by banks and financial institutions (FIs). “We hope that the financial institutions and banks would travel with us and invest in us with a lock-in period of three years at the yield level of 7% per annum,”’ he said.
“We are in the process of recruiting people to function as a fintech company. We have taken on board four independent directors and one non-executive director and about 22 micro and small enterprises have already invested with us as shareholders, that reinforced our approach and resolve to include the firms availing services from us as part of equity holders so that their interest in the company would reduce our risk in delivery of our services for resolving the stress they face in the industry,” he added. The objective of setting up the fund is to promote a comprehensive financial service team with accredited consultants. It aims to help small enterprises access equity markets through mentoring, monitoring and participation and also networking with the NSE-Emerge and BSE. As a first step, we will select 10 companies which want to go public. We will invest up to `50 lakh in them and exit at an appropriate time after listing,” he added.
The clinic will team up with banks by entering into MoUs to extend credit advances on bills discounted and to revise credit cycles, Yerram Raju, said. TIHCL will initially conduct a techno-economic valuation study (TEV) on sick units that approach it for support, before taking a decision. “As part of this initiative, TIHCL will enter into MoUs with Sidbi, SBI, Andhra Bank, Canara Bank and Karur Vysya Bank initially. We plan to offer financial products including rediscounting facility and bridge finance to sick MSME units,’’ he said. As per SLBC estimates, there are about 2,655 sick units in the state.
Explaining the modalities, he said, “First of all, we have to ensure that the sick unit’s entrepreneur is not a willful defaulter. Then we will approach banks with a revival plan, ease credit cycle and revise loan repayment options. We have decided to adopt an industrial estate in and around Hyderabad. We have set a target of rehabilitating 50 sick units in the industrial estate this year,’’ he said. The Centre will support with Rs 50 crore grant-in-aid even while department of industrial policy & promotion has given its in-principle approval. Majority of MSMEs are facing problems from banks owing to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), he informed.