Catalysing SME Growth

BSE has taken various steps for creating awareness among the entrepreneurs, intermediaries and Investors about the SME Platform. We are doing seminars with FICCI, CII, IMC, D&B, ICAI and ICSI and many other Industrial Associations at state and central level. This has created a lot of interest among the entrepreneurs and they are coming forward to get listed on BSE SME Platform which is quite evident from the statistics

What is the importance of Small and medium enterprises in the economy? 

Small and medium enterprises (SME) have attracted the government’s policy focus lately. The small scale segment is a manifestation of India’s socio-economic development model and has met with the country’s long-term expectations in terms of contribution to GDP, industrial base, employment and exports. This segment forms a major part of India’s industrial base. If India is to attain its aspiration of double-digit growth rates and a reduced poverty ratio, greater focus on the well being of the Small and Medium Enterprises (SME) sector becomes a necessity.

What do you think are the major factors that stop our SMEs from listing on a platform like SME exchange? 

Promoters are not aware about the benefits of listing on the platform of the Stock Exchange. Most of the promoters think that they can get listed only when they become a large size company. Also there is apprehension that listing requires a lot of compliance. With the launching of SME Platform now any company having post issue face value capital between one crore to 25 crores, with a net- worth of three crores and net-tangible assets of one crore can get listed on this platform.

What are the major benefits they would gain by listing on SME exchange? 

The major benefits that the company will get by listing are:

• Provides the SMEs with equity financing opportunities to grow their business – from expansion to acquisition 
• Equity Financing lowers the Debt burden leading to lower financing cost and healthier balance sheet 
• Expands the investors base, which in turn helps in getting secondary equity financing, including private placement 
• Enhances company’s visibility. Media coverage provides SME with greater profile and credibility leading to increase in the value of its shares 
• Greater incentive for the employees as they can participate in the ownership of the company and benefit from being its shareholders 
• SME sector will grow better on two pillars of Financial system i.e. Banking and Capital Market

What are the key guidelines an SME should follow to get itself listed? 

SEBI as well as BSE has come out with eligibility criteria for the companies desiring to get listed on SME Platform of BSE Ltd which are as follows:

• The SMEs with the paid up capital up to Rs 10 crores has to mandatorily get listed on SME Platform, between 10 crores and Rs 25 crores has the option to get listed either on main board or on the SME Platform and beyond 25 cores has to compulsory get listed on the main board. 
• Net Tangible assets of at least Rs 1 crore as per the latest audited financial results 
• Net worth (excluding revaluation reserves) of at least Rs 1 crore as per the latest audited financial results 
• Track record of distributable profits in terms of sec. 205 of Companies Act, 1956 for at least two years out of immediately preceding three financial years and each financial year has to be a period of at least 12 months. Extraordinary income will not be considered for the purpose of calculating distributable profits. Otherwise, the net worth shall be at least Rs 3 crores. 
• The post-issue paid up capital of the company shall be at least Rs 1 crores 
• The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR)
• There is no winding up petition against the company that has been accepted by a court. 

However post listing compliance has been also relaxed and accordingly the company has to do half yearly compliance instead of quarterly compliance. The company has only to send abridged version of Balance sheet and P/L account to the investors. The company can migrate to the main board after two years from the SME platform in case the post issue face value capital crosses ten crores by taking two-third non-promoters approval. 

How helpful would be the latest SEBI ruling that allows SMEs to list without IPO? 

Listing on ITP by start-ups and SMEs will provide them better visibility, wider investor base and greater fund raising capabilities. This will further offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community. 

What is the process involved in getting listed? 

The company has to approach the merchant banker who is authorized by SEBI to bring the IPO or they can approach the officials of BSE SME Platform who will assist them in getting the merchant banker. The merchant banker will prepare the Draft Red hearing Prospectus which will in details talk about the company, its promoters and the object for bringing the issue. After that the DRHP will be submitted with BSE SME Platform. The compliance team of BSE Ltd will do the vetting of the document and once the compliance is done than the promoter is called for interview to BSE Ltd. If everything is satisfactory then the company is given the approval for coming out with IPO. After successful completion of the IPO the company is allowed to get listed on BSE SME Platform. 

How does your organization BSE SME plan to educate more small businesses on the benefits of listing? 

BSE has taken various steps for creating awareness among the entrepreneurs, intermediaries and Investors about the SME Platform. We are doing seminars with FICCI, CII, IMC, D&B, ICAI and ICSI and many other Industrial Associations at state and central level. This has created a lot of interest among the entrepreneurs and they are coming forward to get listed on BSE SME Platform which is quite evident from the statistics mentioned below: 

• Number of companies listed so far 41 
• Total funds raised by 41 companies 388.78 
• Total Market Capitalisation- 2726.23 Crores 
• Number of Market Makers registered with BSE SME 66 
• SME IPO index launched on 14th December 2012 with 100 as base (Value as on 6th November 2013) 429.51