Atmanirbhar Bharat: Stimulus Decoded for Startups (3one4 Capital)

Summary

• On May 12th, 2020 the Prime Minister announced an INR 20 trillion package titled Atmanirbhar Bharat built on five pillars.p.3
• Startups were not specifically covered, although startups and new age businesses are slated to contribute USD 1 trillion in India's quest to become a USD 5 trillion economy by 2025.p.4
• INR 3 lakh crores of collateral free automatic loans apply to the 20% enhancement of credit facilities as of February 29, 2020.p.6
• INR 20,000 crores of subordinate debt is offered for stressed MSMEs through a partial credit guarantee by CGTMSE.p.7
• An INR 50,000 crore equity infusion for MSMEs runs through a Fund of Funds of INR 10,000 crore, with daughter funds capped at 20%.p.8
• A startup has a revenue threshold of INR 100 crore and less than 10 years of existence, while an MSME needs plant and machinery investment of less than INR 20 crore.p.5
• TDS/TCS rates for non-salary payments are reduced by 25%.p.9

Key insights

1. Startups are a subset of the universe of MSMEs and can register as MSMEs to benefit from the package.p.5
2. Venture debt funding and shareholder loans are not covered by the collateral free loan scheme.p.6
3. The Fund of Funds exit route is MSME listing on the stock exchanges.p.8
4. Indian public limited companies will be permitted to list abroad directly without first listing in India.p.11
5. Statutory PF contribution is reduced from 12% to 10% for employees and employers not covered under the PM Garib Kalyan Package.p.11
6. Government tenders below INR 200 crore will only be applicable to Indian businesses.p.11
7. MSME dues from Government and CPSEs are to be released in 45 days.p.11