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Power2SME Says Demonetization Forced IPO Delay

Alternative small business lender Power2SME says small businesses’ loan payment times doubled overnight following India’s demonetization efforts, highlighting the impact of going cashless on the nation’s entrepreneurs and, consequently, the SMB finance market. Reports in The Economic Times of India said that Power2SME Founder and Chief Executive R. Narayan highlighted the struggles the lender faced following demonetization and, soon after, tax reform. The impacts of the initiatives have forced the company to delay its planned initial public officer (IPO), the firm said.

“A lot of money went out of the system,” he said. “SMEs grappled with issues of repayment. Our collection days used to be 27 days. That jumped to 57-58 days immediately after demonetization. It took us almost six months to come back to normal.”

According to reports, Power2SME was a market leader before demonetization, closing a $38 million Series E funding round just weeks before the government’s surprise announcement that Rs 500 and Rs 1,000 notes would go out of circulation.

Last July, the government introduced sweeping tax overhauls via the Goods and Services Tax (GST), further disrupting the SMB market in the country. Reports noted that this effect made a mark on Power2SME’s balance sheet.

“When there are large, systemic changes coming into the economy, it was important as a first step to wrap our arms around the change,” said Narayan. “It took us some time to unravel the implications of GST ourselves … To ensure business continuity remains unaffected, we actually had to partner with all our SMEs, bring them on board with the business implications and take them through the process.”

Power2SME had originally planned to go public in the 2019 fiscal year. Now, reports said, the company has delayed the plan as it re-adjusts to the new realities of the market. According to Narayan, the firm is now looking to expand its services to small businesses beyond trade finance and into additional areas like advisory service.

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