The Bombay Stock Exchange, India’s oldest and largest stock exchange, launched a platform for SME businesses in 2012, the BSE SME and Startup index, which is aimed at the Small and Medium Enterprise segment.
The firm’s top official, Ajay Thakur, Head – Startups & SME at BSE in an interview with The SME India talks about how SMEs and start-ups can look at getting listed on its platform and unlock value.
According to Thakur, 35 companies have listed on the exchange in the last 18 months with a total value of Rs 250 crores. He also added that the largest SME listing in the recent ten days occurred for Rs 101 crores from a merchant banker for a company.
The exchange has made certain changes to the listing process. The previous criteria stated that a company must have been in operation for three years, with two years of net profit and a net worth of three crores, but now any one of the three qualifications can be met, and operating profit is now considered, with net worth reduced to Rs. 1.5 crores. They have also cut the listing fees by 20%, in addition to doing an online interview with the promoters to prevent a physical visit to the exchange and eliminating the need for manual interactions. Even post-listing compliance has been decreased, and if they understand the compliance aspect of it, they can easily transfer to the main BSE platform.
He also noted that all government organisations, such as the RBI, SEBI, and the stock exchanges, are working together to foster and develop SMEs into huge corporations.
They have held 300 webinars to help promoters gain entry to the stock market. It is their ongoing goal to increase the number of companies that are listed. They have also eliminated the usage of traditional filing papers in favour of online filing. The exchange has held 2300 physical seminars and met 33,500 entrepreneurs since its beginning seven years ago, and both exchanges have 500 companies listed.
To assist SMEs, they approached industrial associations, clusters, and government bodies for assistance, and they were able to see a large number of promoters come to the webinar and participate, which was not the case previously, when promoter representatives would attend physical events and cover subjects such as debt funding, equity funding, automation, and digitation, thus greatly assisting the promoters. They hope to continue with the hybrid concept after the pandemic is ended, using a combination of webinars and physical meetings.
Thakur explained that formalisation drive is extremely important and the conditions are favourable with interest rates currently at near all-time lows. To access capital markets for SMEs, he explained BSE SME is the apt platform and later on as compliance becomes adjusted many SMEs can get to the main exchange as well.
The exchange has employed Market Makers since the platform’s inception, and it is their role to give two-way quotes that enable them to buy and sell. Investors should keep their money on the SME platform because it is not a trading platform. As a result, they don’t consider it a high-liquidity platform.
Benefits of listing
Promoters obtain funding by diluting their equity; second, the balance sheets improve as a result of having a good mix of debt and equity; third, the company’s visibility improves as it is listed on a stock exchange; fourth, as transparency increases, value is unlocked, allowing investors to invest at various stages. Internally, corporations might offer ESOPs to employees, and this equity can also serve as a collateral for promoters after a few years.
Apart from shifting to the main board of the stock exchange, these 343 listed firms have unlocked a total of 33,200 crores. Manufacturing accounts for over 25% of the total, with logistics, pharma, hotels, and IT accounting for another 10%, and the rest coming from other industries. In the exchange, they have 17 different sectors represented.
Strategy Way Forward
They estimate roughly 60 SMEs to be listed on the platform this year. There is a sense of urgency. So far, 407 filings have taken place, with 343 of them being listed; this year’s response has been better than last year.