Will BSE SME platform buckle up to bring in more investors?

By : |July 9, 2013 0

BANGALORE, INDIA: It has been seven months since the Bombay Stock Exchange (BSE) launched its dedicated SME platform to track Indian capital market conditions with 11 small and medium enterprises. During the period, the count has more than doubled, yet a reality check on the platform throws up mixed results.

On the platform bearing stark similarities to the BSE IPO index, Minister of State (Independent Charge) for Micro Small and Medium Enterprises, K.H. Muniyappa, stated then that it would not just help organizations grow their businesses, but also create employment, with increasing investor interest, as most SMEs in India depend on banks or other financial institutions to get debt financing.

“This time, the government, SEBI and the stock exchanges have put in a lot of efforts to make the third attempt a success. But with the SME platform, companies will not have to rely on loans from banks, but can raise funds through the market and play an important role in contributing to the economic growth of the country.”

Soon after the launch, 10 companies were trading above their issue prices, which seems to have dropped now, despite the number of scrips increasing. Parth Shah from the SME platform informs that the number of scrips stand at 25 currently, which is certainly a good sign.

On the possible cause for the less convincing performance of the scrips, however, a senior manager from a leading brokerage house points out that the guidelines and regulations stipulated by the National Stock Exchange (NSE) are more stringent as compared to those of the BSE.

“Also, liquidity of stocks is much better on NSE than BSE. So, the quality of companies listed on the NSE SME Exchange is way ahead. It might be why NSE has only four companies listed on it, as it is very choosy in selecting SMEs to be listed. On BSE, it’s mostly the responsibility of the merchant banker to keep a tab on the companies listed,” he explains.

BSE’s SME platform criteria of listing, among other requirements, stipulate that companies with “net tangible assets of at least Rs. 1 crore as per the latest audited financial results and net worth (excluding revaluation reserves) of at least Rs. 1 crore as per the latest audited financial results” are eligible to get listed. It means a considerable chunk of the burgeoning number of SMEs in the country can get there.

Sanjay Vijayakumar, an entrepreneur who is the CEO of a telecom solutions start-up, MobMe Wireless, filed for an IPO and tells that they were looking only at NSE to become the first IT firm listed on the exchange. “As we got an approval only on April 2, we are waiting for the SEBI board and the exchanges to come up with their detailed guidelines.”

With SMEs evidently evincing more interest and aspiring to enter the ‘elite-four’ club on the NSE, it remains to be seen whether the BSE will buckle up and woo enterprises that investors are eyeing on. After all, it aims to make the task easier for them, and in an effective way.

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