Small & Medium enterprises (SME’s) particularly in developing countries constitute a bulk of the industrial base and also contribute significantly to their exports as well as to their Gross Domestic Product (GDP).
In India Micro Small and Medium Enterprises (MSEME’s) contribute 8% of its GDP, 45% of the manufactured output and 40% of exports.
The MSME Sector is the largest generator of employment in the Indian economy providing employment to about 70 million people. It forms a major portion of the industrial activity, yet this sector has to largely depend on the banking sector for funds to grow and in most cases bankers do not seem keen to lend to this sector for various reasons.
Fortunately the government of India has set up the Small and Medium stock exchange (SME) to cater to the needs of small businessmen. Today listing on the SME can be done at a fraction of the cost against that to the main board and with all the benefits. Several companies have taken advantage of this platform and have listed their companies on the SME platform.
Most of the promoters in the SME segment over the years through hard work, grit; determination and sacrifice create value but were unable to unlock value. The setting up of the SME platform is a great opportunity to for promoters to unlock value. In order to understand the benefits that would accrue to promoters by listing on the SME, Corporate Mentor, Clifton Desilva spoke to Ajay Thakur, Head SME of the Bombay Stock Exchange to find out how entrepreneurs can scale up their potential. His views…
The BSE SME platform has achieved popularity in a very short period of time: what are the factors you attribute for the success?
We as an exchange understand the importance of SMEs contribution to the growth of Indian economy. Hence, we continue to hold seminars and conferences along with industrial associations viz FICCI, CII, ASSOCHAM, FISME, IMC and various other bodies India the SME Forum, MACCIA, SME Chambers of India and D&B. We are also having seminars with professional bodies like ICSI, ICAI and other associations. Besides this we also conduct meetings with SMEs on a one to one basis to make them aware about the benefits of listing on SME Platform. As of today we have conducted over 400 seminars and events to create awareness among SMEs. These initiatives helped us stay ahead of the curve.
What is the cost difference between listing on the main board and the SME platform?
SME Platform of BSE is a very cost effective way of listing SMEs on BSE SME Platform. We have kept the cost minimal and charging only Rs.50, 000/- as processing fees and 25,000/- or 0.01% of Market Capitalisation (whichever is higher) as annual listing fee. Besides that there are various other costs such as regulatory cost, market making and merchant banker’s fee which are involved in the process of listing. Still it’s very less in comparison to main board.
There is a provision that based on fulfillment of certain criteria that companies from the SME platform can migrate to the main board- what would be the cost of migration?
SEBI and BSE has come out with the guidelines on migration of the companies from SME Platform to Main Board .According to the said guidelines a company can migrate from SME Platform to Main Board after completing 2 years if they fulfill the criteria mentioned under SEBI ICDR Guidelines Chapter X B Clause 106I which provides that companies whose post issue face value capital is more than ten crore rupees and up to twenty five crore rupees, may migrate its specified securities to Main Board if its shareholders approve such migration by passing a special resolution through postal ballot to this effect and if such issuer fulfils the eligibility criteria for listing laid down by the Main Board and where the post issue face value capital of an issuer listed on SME exchange is likely to increase beyond twenty five crore rupees by virtue of any further issue of capital by the issuer by way of rights issue, preferential issue, bonus issue, etc. the issuer shall migrate its specified securities listed on SME exchange to Main Board and seek listing of specified securities proposed to be issued on the Main Board subject to the fulfillment of the eligibility criteria for listing of specified securities laid down by the Main Board BSE charges a fee of Rs.200,000 or 0.5% of market Capitalization whichever is higher at the time of migration.
Your Exchange has tightened the financial eligibility listing norms and raised the financial thresholds from April 1 2015 whereas the other Exchange has not. If the aim is to encourage small and medium enterprises to list on the SME platform, then why the tightening?
In order to strengthen and enhance the screening of companies seeking listing on the SME Segment, BSE has introduced certain additional requirements over and above the SEBI guidelines, which is reviewed periodically. The additional requirements are financial and non- financial in nature.
Financial Norms:
What is the non financial eligibility criteria for listing on the SME Platform?
Non-Financial eligibility criteria for listing on the SME Platform are as follows:
There are many small and medium promoters who are not aware of the SME platform – Don’t you think it is necessary to create more awareness about this platform?
The BSE SME Platform has conducted over 400 events in co-ordination with various institutions such as Ministry of Small and Medium Enterprises, SEBI, FICCI, CII, ICAI, ICSI and other such institutions to create awareness and benefits about listing and trading on the SME platform of BSE.
As of today how many companies are listed on the BSE SME platform and what is the market capitalization?
As on 7th September 2015, 108 Companies have been listed on BSE SME Platform with a total Market Capitalisation of 7,764.75 Crores
What is your target over the next one year in terms of number of companies?
We expect another 100 companies to get listed in the next financial year. We will not be in a position to comment on market capitalization.
What is the liquidity position on the BSE SME Platform?
The SME Platform is meant for informed investors and the minimum lot size is Rs. 100,000. On an average there are 150-200 investors in each of the companies and investment is long term in nature. The platform has been made for gradual development of the SME Companies and various stake holders and therefore liquidity is not so important in this segment. However, we have the concept of market making to provide entry and exit to the investors.
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