Tough eligibility criteria acting as a hindrance for SMEs to file for IPOBANGALORE, INDIA: It is almost a month since the SME stock exchange came into existence in this country. If I look at the progress so far, it is a bit disappointing.
With the two exchanges (BSE and NSE) only one company has listed with negligible trading and three to four companies are waiting to get listed in the next few weeks.
If I analyse the reasons for this poor response, I feel the eligibility criteria seems to be too harsh. The first criteria is that any company which plans to get listed should have at least Rs 1 crore net tangible assets and net worth of the company should be at least one crore.
Second point is about profitability. The company should have recorded profits for two years of the immediate past three financial years. Apart from these two, there are several other tough norms that need to be fulfilled before going for an IPO.
Some of the criteria look very difficult to fulfill for small companies. Many merchant bankers find it difficult to help small companies (in some cases medium-sized companies) to go for listing.
Agreed that the SME exchange is a progressive concept and it is too early to write it off. If the SEBI (Security and Exchange Board of India) comes up with more rational and simplified process and eligibility criteria, it will help SME community to take advantage of the SME exchange.
After all, scope of SME exchange is to ensure liquidity and wealth creation. Also, Exchange plays a facilitator's role in bringing SMEs on a progressive platform for future opportunities.