Macro Economy

Thousands of SMEs ‘ripe to come to the market’

R Yegya Narayanan Coimbatore | Updated on November 24, 2017

Chitra Ramkrishna

Apart from raising capital at competitive rates, listing also offers visibility and brand image: NSE MD Chitra Ramkrishna

Though the SME sector appears to be rather cautious about listing its shares on the SME platform of the National Stock Exchange (NSE) , the exchange is bullish about the business volume this platform can generate over a period of time. Since September 2012, when NSE’s SME platform ‘Emerge’ was launched, only five companies have signed up.

Chitra Ramkrishna, Managing Director & CEO of NSE, shared her thoughts with Business Line on the effort to get SMEs on board and the benefits the sector could get from listing.

Excerpts from the interview:

Since the SME platform was launched, how many companies have opted for listing?

Since the launch of Emerge in September 2012, five companies have got listed on the SME exchange — Thejo Engineering Ltd, MITCON Consultancy, Opal Luxury Time Products, Veto Switchgears and Sanco Industries. They had raised ₹87 crore from the markets.

What is the potential of the SME sector to go public and raise capital from the market?

There has been no study on this. In the two years the exchange was engaged in analysing the potential of the SME sector for listing, there were at least a few thousand companies that were “ripe, ready, profitable” and could “come to the market”.

This could be for raising additional capital, for brand endorsement, and higher visibility that a listing provides them which would be useful for wooing international investors.

But how many of them are ready for listing?

Potentially, there are thousands of SMEs in the country that meet the listing criteria on the SME platform. But how many of them will actually list, the answer would be “a few hundreds”.

Do you think the SME platform has the potential to rival the NSE’s main trading platform in a decade?

Yes, because this is what inclusion really is all about: making finance available to grassroots businesses. As a policy for the NSE, I think it is a huge challenge. Other than raising capital at competitive rates, listing also offers intangible benefits such as “visibility and brand building”.

However, to achieve visibility, the SMEs would have to go that extra mile which would be easier to achieve if they get listed. From the economy perspective, SMEs can build on their growth by accessing capital. This will drive the country’s growth.

But SMEs are wary of going public because of fear of losing ownership, strict disclosure norms, etc…

It is true listing is not an easy transformation for them. SMEs generally appear to be comfortable with their size and scale and have little motivation to change. The exchange could play the role of a facilitator for companies that want to scale up. The exchange can also a play a role in clearing misconceptions of owners.

What other steps has NSE taken to reach out to SMEs?

We launched the Emerge-ITP in March, which is an Institutional Trading Platform that enables the venture capitalist or angel investor or promoter make a block deal, bypassing IPO. This helps to identify a party or send out an enquiry or request for a mass transaction and this segment too has been created on the SME platform.

For angel or venture capital investors, if there is an avenue providing liquidity, they can churn their investments, exiting from one company to enter another, giving a boost to the SME sector. In the next two-three months, 7-10 companies are likely to enter this platform as discussions are on.

Was not the lot size of ₹1 lakh a limiting factor for trading on the SME platform?

The lot size was an issue. More importantly, many merchant bankers found it difficult to comply with the market-making compulsion of three years since it required large capital to be locked up for an extended period. The SME community has given its feedback and it is up to the SEBI to take a call. For a more vibrant SME platform, a pick up in overall IPO market and a solution to these two issues of market-making and ticket size could do the trick.

Published on April 27, 2014

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