SMEs to be allowed to list sans IPO

The finance minister (FM) today said that small and medium enterprises (SME) will be permitted to list on the SME exchanges without making an initial public offering (IPO).

The move will give a significant boost to the two SME exchanges—NSE's Emerge and BSE SME —who are trying to woo small companies to list on their platforms.

The FM has however, said that such issues will be restricted to only informed investors.

Stock exchange officials said that it's a welcome move as it will bring more facilitate listing of more companies.

The FM, in his Budget speech, said that the move to allow companies list without an IPO is in addition to the existing SME platform, where a company can list by conducting a public issue with wider investor participation, including that of retail investors.

Said Ravi Tyagi, head of the SME project at NSE, “We welcome this as it make it easier for smaller companies to get listed. However, we have to see how they defining the 'informed investors'.”

Launched almost last year back, the SME platform for smaller companies –having paid-up capital of less than Rs 25 crore--is yet to take off in the big way with just two companies listing on Emerge and about a dozen on BSE SME.

Market regulator Securities and Exchange Board of India (Sebi) has also vowed to make it relax certain regulations, including underwriting and market making, for SME listings.

The regulator wants the platform to be more cost efficient for issuers and also wants to bring down the obligation on investment bankers to attract more participants in this space.