Liquidity crunch takes centre stage on SME platform

Small and medium enterprises (SMEs) platforms still lack liquidity and institutional participation. Three years ago, exchanges had started the platforms, for SMEs to list on them.

"Institutional investors do not mostly go for small transactions," Uday Patil, director, investment banking, Keynote Corporate Services, said.

G Ganesh, founder, Inga Capital, said, "It is an extremely shallow market. There is no genuine buying and selling on the platform. The stocks are traded among a select group, mostly promoters. You cannot get in and out at will."

LOWDOWN

• Small and medium enterprises (SMEs) platforms still lack liquidity and institutional participation
   
• Three years ago, exchanges had started the platforms, for SMEs to list on them

The average monthly turnover on the BSE SME platform has declined from Rs 11.6 lakh in 2014 to Rs 7.1 lakh in 2015.

The minimum lot size for investment varies between Rs 1 lakh and Rs 2 lakh. Family, friends, and associates of promoters mostly participate on these platforms, experts say.

According to experts, banks and large domestic institutions should be told to participate on these platforms.

Ashishkumar Chauhan, managing director and chief executive, BSE, had said, "The SME platform is an investment platform, not a trading one. So, we are not banking on trades to sustain it. We are going for compulsory market-making. That has been one of the reasons for the platform's success."

The National Stock Exchange has nine firms listed on its SME platform. BSE has 109 firms. It expects another 30 SME firms to list in two to three months.

Talking about institution participation on SME platforms, Sidbi bought about four per cent of the Initial Public Offering (IPO) of Ashapura Intimates Fashion, and Edelweiss in Momai Apparels, MD Inducto Cast, Mangalam Seeds, and Jiya Eco Products. Central Bank of India and Bank of Maharashtra have bought 2.26 and 1.4 per cent, respectively, of the IPO of Opal Luxury Time Products, an SME.

ICICI Bank, State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Indian Overseas Bank, Dena Bank, Union Bank of India, and Central Bank of India have invested in Mitcon Consultancy & Engineering Services, an SME.

Mahavir Lunawat, managing director, Pantomath Capital Advisors, said, "With the development of SME markets, big brokerages have started taking interest. We see subscriptions through brokerages like Motilal Oswal, Edelweiss, Sharekhan. Non-resident Indians are participating on the SME platforms."