In September 2011, markets regulator Securities and Exchange Board of India (SEBI) had granted the Bombay Stock Exchange (BSE) permission to launch the SME Exchange. The criteria for listing would be a minimum of 50 investors and Rs.50 lakh post initial public offer (IPO) paid up capital.
Companies with Rs 50 Lakh to Rs 10 crore in paid capital will have to be listed compulsorily, while companies with Rs 10 crore to Rs 25 crore in paid up capital will have the choice of being listed on either the SME exchange board or the Main board, as per a report published in The Economic Times
Lakshman Gugulothu, CEO of the first SME-focused exchange in India says SMEs have a huge listing potential once the BSE SME exchange becomes operational. Various activities to build awareness about the benefits of the SME’s listing have been started by the BSE.
Up until now debt financing has been the only option, with no other alternate equity options, Gugulothu noted. SME’s lack awareness about equity capital, funding options and stock markets.
Banks are only meeting a fourth of SMEs funding requirements. Equity financing will lower the debt of the already listed companies, leading to a healthier balance sheet with lowered financing costs. This will help the growth of the SME’s from expansion to acquisition. A listing in the SME exchange would also enhance the visibility of the company. The Co-Chairman of the Punjab Committee of the PHD Chamber, R S Sachdeva agreed that the introduction of the SME Exchange would provide the much-needed opportunity for SME’s to avail easy access to capital marketing. The Exchange will also help resolve the issue of lack of capital in start-ups.
Dalip Sharma, regional Director, PHD Chamber, added that the SME exchange would also encourage the entrepreneurial spirit and innovation within SME’s.