Financial Daily from THE HINDU group of publications
Friday, May 26, 2006
Financial Daily from THE HINDU group of publications Friday, May 26, 2006 |
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Markets
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Stock Exchanges Our Bureau
MR K.P. KRISHNAN (centre), Joint Secretary, Ministry of Finance, with Mr Pratip Kar (left), ED, SEBI, and Mr Ravi Parthasarathy, Chairman, IL&FS, at a workshop held in Mumbai on Thursday. - Paul Noronha
Mumbai , May 25 The Government is talking to the promoters of the now defunct Over the Counter Exchange of India (OTCEI) to revive it as a trading platform for small and medium enterprises, Dr K.P. Krishnan, Joint Secretary, Ministry of Finance, said here on Thursday. Mooting this as a viable alternative to creating yet another stock market institution, he said that the existing capital market mechanisms which work well for large firms were perhaps not optimal for small company stocks in the primary and secondary markets. His observations came against the backdrop of the May 8 report of the SEBI-convened G. Anantharaman Committee detailing the fate of 20-odd regional stock exchanges where trading volumes have slumped. With the Parliament having passed the SME Act on May 23, Dr Krishnan stressed the need for easier access to funds. "Equity financing of the kind traditionally seen in the corporate sector is absent in the SME sector. We have to make the equity market for SMEs work better. Not only should we look at easing listing norms, ensure disclosure and transparency but also ensure enough liquidity through increased retail and institutional participation," he said at a workshop on capital market access for small and medium enterprises.
Funding for SMEs
Sharing the sentiment, Mr Ravi Parthasarathy, Chairman, IL&FS Ltd, said equity markets are averse to funding smaller businesses, while banks are selective and cautious in lending to them. "SMEs form the underpinning of any developed economy, hence we need to focus on them," he said. SMEs in India have traditionally relied on debt financing from NBFCs and banks. Mr N. Balasubramanium, CMD, SIDBI Ltd, prescribed "hand holding" for medium and small-scale companies besides an exclusive trading platform for SMEs, as they do not have a national presence.
Regulatory standards
According to Mr Pratip Kar, Executive Director, SEBI, there is need to concentrate on market development and regulatory development issues while setting up a market for SMEs. Favouring a separate trading platform for SMEs, he vehemently opposed lowering of regulatory standards in order to encourage a vibrant SME market. Referring to a presentation made on AIM, the international market for smaller and growing companies regulated by the London Stock Exchange, Mr Kar suggested evaluation, as it would be no easy task to replicate the effort in India. "If you look at any developed exchange-based SME market, you will find they succeeded by piggybacking on parent exchanges. We should look at having an exchange driven infrastructure. Exchanges can come together to set up market of choice," he said. The SME driven exchange should be the exchange of choice for SMEs. "You cannot have one-size-fits-all model," Mr Vidhu Shekhar, Vice President, NSE, said, stressing the need to preserve market integrity. While there should be no compromise because it is an SME market, it should be done without placing individual burden on the companies, he said. Mr Ramu Sharma, chairman, federation of Indian Stock Exchanges called for a cohesive effort by the BSE, NSE and RSE while setting up a separate trading platform for SMEs.
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