Startups eligible for relief under Aatmanirbhar Bharat : Piyush Goyal

Commerce Minister Piyush Goyal has said most startups will be eligible for additional liquidity and funding under the credit and funding support announced for MSMEs under the Aatmanirbhar Bharat Abhiyan package.

Goyal told that the government is ready to support stressed startups.

"Most of the startups will be eligible for additional liquidity and funding under the Rs 3 lakh crore, 100% credit guarantee credit facilities under the Aatmanirbhar Bharat package," Goyal said in an interview with the channel on Saturday.

"Apart from that, Sidbi gets financial assistance through the government of India, and through the Startup India Fund we are able to supplement SIDBI’s efforts to provide adequate funding to startups. I have had discussions with startups to understand their issues and have also had SEBI, RBI, SIDBI on discussions with startups and the venture capital industry. We are conscious of their concerns and we will handhold and support companies which are stressed," Goyal said .

The government had announced several measures for MSMEs under the Aatmanirbhar scheme, including Rs 3 lakh crore of collateral free loans , Rs 20,000 crore of subordinate debt for stressed MSMES , and a fund of funds for MSMEs with a corpus of Rs 10,000 crore.

The government also changed the definition of MSMES which could also help many startups become eligible to register as MSMEs.

The government 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 R 20 crore.

While startups did not specifically get any mention in the relief package announced by the Finance Minister earlier this month government officials had earlier confirmed that they were eligible to avail relief measure announced under the Scheme. All startups have to do is register as MSMEs on the Udyog Aadhaar portal.

The startups sector reacted positively to Goyal's comments.

"Being an MSME and a startup aren't mutually exclusive, but an ambiguity did exist. I'm glad to see that it's been clarified now," said Siddarth Pai, Founding Partner, 3one4 Capital who had asked its portfolio companies to register as MSMEs.

"For ease of doing business, they should automatically allow all DPIIT registered startups to get registered as MSMEs under Udyog Aadhar," he said.

LocalCircles founder Sachin Taparia tweeted, "Great to hear Piyush Goyal that startups will be eligible to secure funds via AtmaNirbharBharat package. Per LocalCircles survey 71% startups have less than 3 months of cash. Hope DIPP, Startup India will ensure processing."

However, industry members are still skeptical whether the credit gurantee scheme will help startups, given that most startups don't take loans from banks.

"One of the problems that all startups in India face is that they lack access to credit," Pai had told CNBC TV 18 earlier.

"This is why startups raise equity rounds or rounds of financing in order to subsidise working capital operations. Bank and NBFC penetration for startups is very low. Even with the announcement of the 3 lakh crore credit guarantee scheme, it only applies to those MSMEs who have a loan outstanding as of Feb 29," he said.

3one4 Capital estimates that out of the 50,000 India startups, only 7500 startups may have access to credit facility from a bank of NBFC.

A recent survey put together by Nasscom reveals that 70 percent startups have a runway of less than three months, 90 percent startups are seeing a decline in revenue and 40 percent have temporarily closed operations. The impact can be felt on ground, with the ecosystem being flooded with massive lay-offs due to the lockdown and economic fallout.