State Bank of India (SBI) Chief Arundhati Bhattacharya has urged small and medium enterprises (SMEs) to consider equity when tapping investors. She was speaking at an Indian SME manufacturing summit.

“Equity is a very much neglected area. There are people who can give you equity but one must know how to convince them (equity investors) that you are the right person with whom the returns will be very large,” she said.

Drawing focus towards lack of equity in India, she said, “We have many entrepreneurs but they start off with debt from family and friends and then from the bank. With more debt, the requirement of margin goes up and hence strains on financial statements.”

Supporting the cause by highlighting the cases of start-ups like Amazon and Flipkart who eventually made it to the big leap, she said that equity-raising equal to even one-thousandth of these players can boost businesses to a high extent.

“A good idea with good cash flow potential will see investors willing to put in money. What convinces them (investors) is the passion you have for making a successful enterprise. Passion and a rational mind working through the pros and cons of the business are critical ingredients,” she said.

She also encouraged SMEs to up their game in global market and compete with cheap Chinese products by way of quality production, packaging and services.