Drive aimed at educating SMEs about the BSE SME platform
Bombay Stock Exchange Ltd has initiated a series of seminars across the country towards educating shareholders, market intermediaries and investors on the importance of listing of small and medium enterprises on BSE SME Exchange. The initiative is aimed at creating awareness on raising of equity capital by SMEs, thus promoting financial inclusion. It will also facilitate development and enhancing the competitiveness of micro, small and medium enterprises.
Beginning its first leg from Kolkata on 29th June, the first phase of the programme is designed to cover New Delhi, Pune and Rajkot. It is part of the BSE’s endeavor to ensure continuous awareness that conforms to the needs of diverse market participants and investors.
Interestingly, each workshop would have an industry expert that will create awareness among the SMEs, market intermediaries and investors about the BSE SME Exchange.
Speaking about the initiative, Lakshman Gugulothu, CEO, BSE SME Exchange, “BSE SME Platform provides a great opportunity to the entrepreneurs to raise the equity capital for the growth and expansion of SMEs. It also provides immense opportunity to the investors to identify and invest in good companies at early stage. It will help unleash the valuation of the company and in the process create wealth for all the stakeholders including investors, besides considerable capital gain tax benefits and facility to exit at any point of time.”
BSE SME platform is expected to be operational September 2011 onwards.
BSE SME EXCHANGE - REGULATIONS
- Issuer with post issue face value capital up to Rs.10 crores shall be covered under the SME Platform, Issuer with post issue face value capital between Rs.10 – 25 crores may get listed at SME Platform and Issue with post issue face value capital above Rs.25 crores has to necessarily listed at main board of the Exchanges.
- BSE Main Board criteria for the paid up capital is increased from Rs. 3 crores to Rs. 10 crores.
- Suitable provisions for migration to/ from main board
- The minimum application amount as well as minimum trading lot shall not be less than Rs.1,00,000/-
- All existing Trading Members would be eligible to participate in SME exchange without any further registration and by default members.
- 100% underwriting of the IPO issue by the Merchant Banker and shall underwrite 15% in their own account.
- The Merchant Banker to the issue will undertake market making through a stock broker who is registered as market maker with SME Exchange. The Merchant Banker shall be responsible for market making for a minimum period of 3 years
- Shall be required to provide two way quote for 75% of time in a day, to be monitored by the Stock exchange
- The minimum depth of the quote shall be Rs.1 lakh in secondary market and there will be trading of lots of size of Rs.1 lakh.
- Execution of orders at the quoted price and quantity to be guaranteed by market makers.
- Not more than 5 market makers for a scrip.
- Market Makers may compete with the other Market Makers.
- Market Maker allowed to deregister by giving one month notice to the exchange.
- BSE SME exchange will prescribe the minimum spread between Bid and Ask price.
- During the compulsory market making period, the promoter holding shall not be eligible for the offering to market makers
- Trading system may be either quote driven or hybrid.
- The SMEs listed will be included as a group in the BSE’s BOLT system – ‘M’ and ‘MT’ Groups.
- The BSE SME Segment will be part of the BSE BOLT System.
No additional infrastructure is required by the Member brokers.
- The trading time of this platform is from 09:00 am to 03:30 noon
- All the empanelled merchant bankers with SEBI can do merchant banking for the BSE SME Exchange (by default).
ADVANTAGES OF THE BSE SME EXCHANGE
- Provide the SMEs with equity financing opportunities to grow their business – from expansion to acquisition
- Equity Financing will lower the Debt burden leading to lower financing cost and healthier balance sheet
- Expand the investors base, which in turn will help in getting secondary equity financing, including private placement
- Enhance company’s visibility. Media coverage can provide SME with greater profile and credibility leading to increase in the value of its shares
- Incentives for greater venture capital participation by providing an exit option thus reducing their lock-in period.
- Greater incentive for the employees as they can participate in the ownership of the company and benefit from being its shareholders
- Encourage innovation and entrepreneurial spirit
- Capital Market will help distribute risk more efficiently By transfer of risk to those, who are best able to bear it
- SME sector will grow better on two pillars of Financial system i.e. Banking and Capital Market
BENEFITS OF LISTING TO THE SMEs
There have been a traditional ways of funding available to the SME Companies. A dedicated exchange for these SMEs will help them in finding a solution to their financial requirements and crunching expansion plans.
Listing of a company on the exchange gives better valuation to the company. The debt and equity ratios will improve and the balance sheet will look much healthier.
The tax benefits are immense. Any share of sales of unlisted company will attract 10% long term capital gains tax. However, the long term capital gain tax on listed company is zero.
The listed SMEs will unlock their wealth in the medium to long term and will do the wealth creation for the promoters and the investors.
Transparency and corporate governance will improve manifold by listing on the BSE SME Platform. The repose of faith by the investors – domestic and foreigners in the listed SMEs will be high.
Listed company will have easy accessibility to alternate funding options. The banks, P/E funds and other financial institutions will provide them the loans very easily. The fund raising through ADRs and GDRs become easier. Also, the company can raise more funds through follow on public offering.
The listed SMEs will get better visibility among the investors. The investor base of the company improves for the listed companies in medium to long term.
Bombay Stock Exchange is one of India’s leading exchanges and has played a prominent role in developing the Indian capital market. BSE is a corporatized and demutualised entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange as strategic partners.
BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives and mutual funds. It also provides a host of other services to capital market participants including risk management, clearing, settlement, market data services and training. It has a global reach with customers around the world and a nation-wide presence.
BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments. It operates one of the most respected capital market training institutes in the country (the BSE Training Institute).