Business Standard Smart Business on MSME fund raising and understating price risks

Most MSMEs depend on banking funding for their capital needs. Also, there is little awareness on price risk management and use hedging tackling for volatility. The webinar provided several insights and anecdotes on how MSMEs can work on building a solid foundation by tapping the equity capital markets and commodity derivatives markets. Ajay Thakur head of BSE SME explained the eligibility criteria for listing on the exchange platform meant for companies with paid up capital of less than Rs 25 crore. Less reliance on debt, value unlocking and ease of raising incremental capital are some of the benefits of SME listing, explained Thakur. Rishi Nathany, head business development at MCX provided valuable insights on how commodity exchanges SMEs can be use price risk management to insulate their business from sharp volatility prices of key raw materials. Hedging on exchange platform is way to survive and obtain long-term visibility, he said. Vijay Kumar, MD & CEO, NCDEX highlighted that the agriculture sector growth rates lagged the rate at which bank credit has growth in the country. This mismatch signals that the money is flowing into risky territory. Large portion of the agri economy is operating without a risk management framework. This issue can be tackled by using market-based instruments such as options, said Kumar. Ashok Agarwal, Chairman, Globe Capital Market said people often talk about speculation in the equity market. But the biggest speculation is when a company doesn’t hedge. Hedging is important for surviving. He illustrated how hedging can be a financing option and can be used for inventory management.