The first ‘Buying Club’ for SMEs in India, Power2SME, has announced that it had concluded CY2015 with Infosys co-founder and former Chairman of UIDAI, Nandan Nilekani stepping in as a strategic investor for the company's undisclosed Series D round. All existing investors-Accel Partners, Kalaari Capital and Inventus Capital also participated in this funding round.
Before starting Power2SME in 2012, R Narayan, a cost accountant by education, had successful stints at Tata, Oracle and Microsoft. The idea to start Power2SME came to him after his experience on the field. In an earlier interview with YourStory, he explained,
I used to deal with both the SME and enterprise segments. I would see a request coming in from an SME for a laptop, which would be quoted at Rs. 42,000. A similar request from a large enterprise, say SBI, would receive a quote of Rs. 28,000.
Seeing a big opportunity, he began by clubbing similar demand from other SMEs, and placing bulk orders to create a win-win situation. The company claims to help SMEs in increasing their profits by sourcing input raw materials(chemicals, additives, inks, paints, metals, polymer commodity, polymer engineering) at the most competitive price points.
Recommended read from 2013: Powering the SMEs the Narayan Way with Power2SME
After growing to six offices with a team of over 150 employees across India, Power2SME announced that it had raised a Series C round of INR 42 crores from Accel Partners, Kalaari Capital and Inventus Capital in September 2014.
Power2SME claims that over the last three years it has worked with close to 30,000 SMEs and used technology to translate its need for competitive raw material pricing as well as financial assistance through a large number of financial institutions and partners. The company works with large, established suppliers and vendors such as SAIL, TATA Steel, ESSAR Steel, Allied Strips, JSW, Rathi Steel, Victor Exim, Balaji Enterprise, POSCO Steel, Apollo Pipes, JSL, etc.
70% of monthly recurring cost for a manufacturing SME is incurred in purchasing raw material, according to an internal survey at Power2SME. Operating in an unstructured market, SMEs generally find it difficult to access right quality raw material at right price and l ack of access to easy finance and credit adds to the criticality of the situation.
Power2SME will utilize their recently acquired funds to further expand in terms of product verticals. Planned expansion categories include rubber, packaging materials and metal clusters – which will, consequently, also boost sales for steel; presently the largest selling product category. Talking about the fund raise, R. Narayan, Founder and CEO, Power2SME said,
It is critical to foster the sector to meet the national imperatives of financial inclusion and to generate employment in India. Power2SME is working towards creating an ecosystem that addresses SMEs’ challenges in raw material procurement and financial assistance, which are major roadblocks for growth of SMEs.
With a business focus to break even in the coming financial year Power2SME looks to broaden its product portfolio, strengthen and deepen vendor relationships and continue to engage on the ground with SMEs' pan India through its 'SME transformation camps' while strengthening its technology platform and mobile app offering.
Power2SME's focus is to more than double the current share of manufacturing to 25 percent of GDP by 2022, from the existing 12 percent. Commenting on the investment Nandan Nilekani laid emphasis on the role of the Indian SME in building the growth of India,
Indian SMEs act as an engine for growth of our nation and they are critical to making India a manufacturing hub. Power2SME has a unique business model that focuses on making SMEs bankable and profitable and am excited to watch the growth journey of this company as it continues to contribute in strengthening the SME social fabric of the nation.
According to the Ministry of Micro, Small and Medium Enterprises there are 36 million small units in India. Most of them are buyers and sellers of various industrial goods and will benefit greatly from online platforms like Industrybuying that aggregate supply and demand. This segment also does not face the FDI issues that online retail faces. FDI is allowed in wholesale e-commerce in India. Industrybuying, Amazon, Tolexo, Power2SME and Bizongo, are all fairing well suggesting the scope of accommodating multiple players in the market.
2016 is the 'wait and watch' year for many sectors as the market leaders are targeting to break even. If they achieve it, this will be one less battle for them to fight.
(Disclaimer: Kalaari Capital is an investor in YourStory)