Many founders of small and medium-sized enterprises (SMEs) lack a clear financing strategy. They might take bank loans, attract equity capital from interested investors, or borrow from friends and relatives. Such a diverse approach can lead to cash flow problems over time, as the source of capital does not match the real needs of the business.
During the MSME Sparks 2026 event, which was held virtually from June 22 to 25 and concluded with a grand finale on June 26 at ITC Gardenia, Bengaluru, Eklavya Gupta, founder of Recur Club, delivered a presentation as part of a discussion titled 'The Right Capital for the Right Growth.' Recur Club helps SMEs find lenders who offer non-dilutive capital, meaning debt instead of equity.
Gupta emphasized that the choice between debt and equity is not a one-time decision. It depends on the reasons why the business needs money, the duration of its use, and the level of risk.
According to Gupta, the first question founders should ask is: 'What exactly is this capital needed for?' A business facing payment delays from clients or excess inventory requires short-term working capital. For such situations, instruments like invoice discounting, typically calculated for 60–120 days, are suitable.
Long-term expansion scenarios, such as building a factory or purchasing equipment, can most often be financed through banks and NBFCs, as these investments are secured by physical assets. However, growth initiatives, like entering a new market, expanding the sales department, or marketing investments, are harder to finance through traditional lenders and often require alternative lending structures or other forms of long-term capital.
For Gupta, the decisive factor in choosing between debt and equity is one question: how predictable is the outcome? He believes that founders too quickly lean towards equity. 'If the outcome is uncertain, use equity because then you don't have to return it if it doesn't work,' he stated, referring to research and development or companies without sufficient revenue history to qualify for a loan.
In all other cases, he believes debt is the more effective option. He compared equity to a house: 'Once you give away a room, you won't get it back. Debt is like renting.'
Furthermore, he shared general guidelines for managing leverage: startups should avoid a debt-to-equity ratio above 2x, mid-stage companies can reach around 3x, and more established enterprises up to 4x. Exceeding these limits, he warns, leaves little room to absorb a downturn.
India's financial ecosystem has undergone significant changes in recent years. New underwriting models, based on GST declarations, bank statements, and credit bureau data, have made formal credit accessible to many businesses that previously struggled to obtain loans, regardless of whether they operate online or offline. Nevertheless, Gupta noted that the core principle of lending remains unchanged: 'Cash flow is king. Any financier looking at your business looks at the cash flow, not the accounting records.'
Strong financial performance alone is insufficient if lenders cannot easily verify it. Compliance is often the first check. Missing GST or TDS filings can raise concerns even before lenders assess the business itself. Accounting becomes just as important when companies seek large loans. Gupta noted that when the debt requirement exceeds approximately 25 lakhs, audited financial statements become a minimum requirement, replacing informal records.
He also pointed out related-party transactions as one of the most common mistakes of founders. Selling or buying goods from companies they also own makes it difficult for lenders to distinguish between real business activity and internal reporting, leading many to discount this revenue. Client concentration raises similar concerns: a business heavily reliant on one or two clients may appear stable, but losing one client can significantly impact its income, increasing credit risk.
Gupta also refuted the notion that SMEs outside major cities face a structural disadvantage in attracting capital. As underwriting expands to second and third-tier cities, and regional lenders emerge, he believes location is less important than the fundamental foundations of the business. 'The business must have its strengths, the business must meet the requirements, the business must grow,' he said. 'That is more important than your location.'
Enterprises in remote areas can still benefit from working with lenders specializing in those markets, but geography is no longer the main obstacle. Ultimately, Gupta asserted that raising capital, whether debt or equity, should never become a last-minute event. He advised: 'Do not leave it until later to raise debt or equity.'
Businesses that prepare in advance negotiate from a position of choice, not necessity.
The Indian group Shapoorji Pallonji has commenced planned refinancing of INR 25,500 crore ($2.7 billion) through the sale of local currency bonds. This move helped restore investor confidence after several months of uncertainty regarding the group's ability to meet upcoming debt maturities.
One of the group's subsidiaries plans to issue rupee-denominated bonds worth approximately INR 15,000 crore. These bonds will be offered to a group of investors, including Farallon Capital Management, Davidson Kempner Capital, and Cerberus Capital Management. Information about the deal was provided by representatives who wished to remain anonymous as the details are confidential. The collected funds are intended for refinancing the debt of Goswami Infratech Pvt.
Furthermore, the group secured $650 million through a three-year dollar bond loan closed on Friday at an interest rate of 14.5 percent. Deutsche Bank AG acted as the sole arranger for both tranches of the offering and, according to sources, may invest around $400 million, making it one of the largest participants.
This capital raise provides the infrastructure and real estate conglomerate with necessary liquidity, especially after the company twice extended the maturity of Goswami's debt. It also alleviates concerns about the possibility of refinancing short-term obligations following lengthy negotiations with creditors. Investors are also closely watching the group's 18.4% stake in Tata Sons Pvt., as delays in unlocking the value of this asset have complicated refinancing efforts.
Ajay Mangluni, CEO of Capri Global Capital Management, noted that the successful completion of the Shapoorji deal would be another milestone for India's private credit market and would boost investor confidence. He added that some local funds are showing interest in the deal due to some transparency regarding Tata Sons.
Previously, refinancing delays had caused concern among investors, and some holders were offering Goswami's unsecured debt obligations at around 90 percent of par on the secondary market. Although reports of transactions at such levels were absent, last week there were offers near par following progress in refinancing, according to insiders. The last recorded secondary market transaction took place on June 16, when approximately INR 200 crore of Goswami NCDs were sold at a price of INR 165.33 per unit, according to the National Stock Exchange of India. The BSE Ltd. and NSE exchanges only display completed trades, with the latter being the more frequently used platform. Buy and sell offers that have not yet resulted in a deal are often discussed confidentially.
The three-year zero-coupon rupee bonds of SP Group will be priced with a yield of 18.95 percent. Existing investors will receive a small discount, leading to an effective yield of approximately 19.05 percent. The bonds also include a green-shoe option. The loans are secured by shares of the group's firm Afcons Infrastructure Ltd. and Tata Sons, in which SP Group holds an 18.4% stake. According to the credit agreement, the company must repay INR 135 billion within 24 months.
Shiv Gupta, founder and CEO of Sanctum Wealth, stated in an interview with Abhinav Ranjan that after a long period of dominance by small and mid-sized companies, investor interest is reviving for large-cap stocks. He emphasized that profitability remains a key factor for the markets, and expected profit growth in the mid-range for FY27 will be crucial given that current valuations are not cheap.
Despite the continued role of interest rates and geopolitical uncertainty, monetary policy in India, following a 125 basis point easing and pause, now acts more as a stabilizer than an expected short-term yield driver. In the future, three factors will play a vital role: corporate earnings, energy prices, and the inflow of foreign investment.
The immediate trigger is the seasonal reporting cycle, as achieving planned profit targets is critical when valuations are low. Furthermore, investors should closely watch the progress of the agreement between India and the US, as well as the decisions of the Reserve Bank of India (RBI) as inflation and growth develop. Geopolitical events remain on the radar, but they are expected to have less impact than earlier this year. The IPO pipeline deserves special attention, as healthy capital formation is positive, but the large volume of issuance competes for investor liquidity.
For a balanced portfolio, Gupta recommends allocating funds approximately in a ratio of 40 percent in equities, 25 percent in debt instruments, and 25 percent in alternative assets, including private equity, private debt, and gold. A moderate overweight position of 10 percent is maintained for gold. It was also noted that interest in large-cap stocks is reviving after small and mid-sized companies dominated the discussion. In the fixed-income segment, healthy demand has been observed for private and structured credit, and private equity continues to attract long-term investors. A noticeable change has been the growing adoption of gold, as well as increasingly silver, as permanent components of diversified portfolios. Moreover, international investment has expanded.
Although mid and small-cap companies outperformed large-caps last year, both groups sharply corrected in the second half of 2024 and again in 2025. Even after this, many trade at higher multiples relative to their own history than large-cap stocks. The Nifty 50 index is valued slightly below a 21x trailing earnings multiple, down from 23x to 24x the previous year. Market leadership is shifting, and value is being seen in large-cap stocks, which represent a less crowded market segment in case of sentiment changes. Regarding Artificial Intelligence (AI), Gupta believes that markets often oscillate between excessive optimism and pessimism when valuing new technologies. History shows that technological shifts rarely eliminate industries overnight but reward companies with competent management teams that react quickly and utilize new technologies effectively. Most of the market's focus was on the infrastructure supporting AI; the next phase, where implementation transforms into applications built on this infrastructure and drives productivity gains across various sectors, is still evolving and could create opportunities in many sectors, including India.
Long-term opportunities in wealth management in India remain exceptionally attractive due to rising household wealth, increasing savings financial activity, product diversification, and growing demand for advice. However, the business is becoming more demanding: competition is high, talent is scarce, technology requires constant investment, and client expectations continue to rise. AI-driven technologies are likely to cause massive structural changes over the next decade, enabling firms not only to increase productivity but also to completely rethink their service models. Gupta believes that scalability is important, and consolidation is inevitable, with early examples already being observed. A prolonged period of sluggish market, increased investment needs, or several firm-level setbacks caused by excessive optimism could accelerate this process.
Acknowledging some margin pressure due to increased competition, greater investor caution towards certain instruments in the short term, and rising costs, Gupta notes that these factors are offset by powerful structural tailwinds. Over the full cycle, industry margins remain in a healthy range. At Sanctum, these short-term realities are recognized, and actions are tactically adjusted, including a more patient and selective approach to hiring. Nevertheless, the company remains firmly focused on the long term, continuing to invest in people, productivity, and technology to build capacity and strengthen the platform.
