'Huge potential for listing on BSE SME Exchange'

Small and medium enterprises have huge listing potential once the BSE SME Exchange commences operations, the CEO of the first SME-focused exchange in the country, Lakshman Gugulothu, said today.

“The Indian small and medium enterprise (SME) sector will have a huge listing potential in the coming years," he said.

Gugulothu said the BSE has undertaken various activities to create awareness about the likely benefits for SMEs on listing.

"So far, there have been only debt-financing options, without any access to alternate equity options," he noted.

There is a general lack of awareness among SMEs about equity capital, stock market and funding options other than banks, he said.

Saying banks were able to meet only a fourth of SMEs’ funding requirements, Gugulothu said a lot of awareness needs to be generated among SMEs, market intermediaries and investors about the exchange.

Outlining the need for an SME exchange, he said equity financing would lower listed companies’ debt burden, leading to lower financing costs and a healthier balance sheet, by providing SMEs with equity financing opportunities to grow their business from expansion to acquisition.

It would also enhance a company’s visibility.

R S Sachdeva, co-chairman of the Punjab committee of the PHD Chamber, said, "Introduction of the exchange would provide much-needed opportunities for SMEs to access and avail the capital market easily."

It would also help small and medium enterprises resolve the serious start-up issue of lack of initial liquidity, he added.

PHD Chamber regional director Dalip Sharma said the exchange will provide a great opportunity to access equity financing to grow business and lower debt.

"It would definitely encourage innovation and entrepreneurial spirit," he said.

In September, the Securities and Exchange Board of India (Sebi) had granted permission to the BSE to launch the SME Exchange.

The basic criteria for listing on the bourse would be a minimum of 50 investors and Rs 50 lakh post-Initial Public Offer (IPO) paid-up capital.

For companies with Rs 50 lakh to Rs 10 crore paid-up capital, listing would be compulsory, while in the case of companies with paid-up capital of between Rs 10 crore and Rs 25 crore, they would have the option of listing on either the SME Exchange or the main board.

"We have waived off the three-year profit-making criteria of the main board. The listing process has been simplified and SEBI involvement has been made minimal," Gugulothu added.