Startups are looking at registering themselves as MSMEs to avail the relief measures announced for the sector by the Finance Minister on Wednesday. The push, in some cases, is coming from their investors.
Venture Capital fund 3one4 Capital is asking its portfolio startups to register as MSMEs given the host of benefits they can avail, especially during a challenging time like this.
The government on Wednesday announced several measures for MSMEs, including Rs 3 lakh crores of collateral free loans , Rs 20,000 crore of subordinated debt for stressed MSMEs and moreover, a fund of funds for MSMEs with a corpus of Rs 10,000 crore.
The change in the definition of MSMEs announced on Wednesday could also help many startups become eligible to register as MSMEs.
The government has revised the definition of MSMEs to include both manufacturing and service companies with turnover of up to Rs 100 crore and investment in machinery or equipment of up to Rs 20 crore.
Currently, a lot of early stage startups have registered under the government’s Startup India scheme, the definition for which was also broadened during the Budget last year to include companies that are less than 10 years old and with an annual turnover of up to Rs 100 crore. As per DPIIT, close to 32,000 startups have received recognition under the scheme, which also gives them several tax benefits and easier compliance.
“Ever since Startup India was launched we were asking our portfolio companies to register as startups. Since April, we thought there would be a relief package for MSMEs and hence we started asking our companies to consider registering On the Udyog Aadhar portal for MSMEs,” said Siddarth Pai, founding partner at 3one4 Capital
“With the new benefits also coming in and the MSME definition expanding, we are going to ask our portfolio startups to register as MSMEs to be able to avail the benefits,” Pai said, adding that majority of the fund’s 50 plus startups are eligible to register as MSMEs.
Following the news of the relief measures for MSMEs, several corporate lawyers say they have been receiving queries from startups for the same.
“We have received calls from some startups asking about registering under MSMEs to get the benefits. We are also seeing several ecommerce companies looking to get sellers on their platforms to register as MSMEs,” said Arjun Sinha of AP & Partners.
Apart from the stimulus, the government has also announced several incentives such as reserving government procurement tenders up to Rs 200 crore for domestic companies as well as ensuring that MSME receivables from government and public sector enterprises are cleared within 45 days.
This could also benefit startups, as per industry members."A lot of startups looking to get benefits from Sidbi's fund for funds were already registering as MSMEs. More startups will do so now to get the benefits from the new fund of funds announced for MSMEs," said Rehan Yar Khan, co-chair, venture capital investors at IVCA.