Regional merchant bankers cash in on SME platforms

Offer services similar to national level merchant bankers for listing SMEs on platforms

Small and medium enterprise (SME) platforms of both BSE and NSE have opened doors for regional merchant bankers. Cashing in on the trend of SMEs raising capital through such platforms, regional merchant bankers have joined the bandwagon by offering services similar to national level merchant bankers for listing SMEs on platforms.

What has worked in their favour, say regional merchant bankers, is that being a local it has become increasingly easy for them to convince the otherwise reluctant SMEs in their region to raise capital through such platforms.

As of now these merchant bankers provide services such as advisory, branding and valuations, fund raising through PE and merger and acquisition. While IPO segment is relatively new for them, small lead managers are confident of entering the IPO market.

"To be a regional player is our strength as our reach and knowledge about local SMEs is more and we understand the need better than any others. This makes it easy to convince regional companies about SME platforms," said Munjal Shah, senior manager ? merchant banking at Monarch Networth Capital.

Munjal added that with SME IPOs gaining traction, regional merchant banking firms like Monarch have been focusing on strengthening their team in order to serve better their SME clients.

Earlier, regional merchant bankers or lead managers were not offering IPO related services due to lack of experience and confidence in providing these services. But after knowledge sharing by exchanges and others, several local merchant bankers have started SME IPO services in Gujarat, Maharashtra and other southern Indian states.

According to Ravi Varanasi, head business development at NSE, gradually several regional lead managers from states like Gujarat and Maharashtra, among other states, are getting active for SME IPO.

"The whole scene has changed in last two years. Their reach may be limited but local merchant bankers are as capable as some of the big merchant bankers," said Varanasi. However, industry experts said that while there is potential for local merchant bankers, IPO related services being regulatory matter, there are certain risks involved.

"As merchant bankers, regional players have similar experience and IPO market may open new avenues for them. However, challenges revolving around regulatory issues remain post IPOs," said B Madhuprasad, chairman of Association of Investment Bankers of India. As on date, 15 small companies have been listed on NSE Emerge. At BSE SME Platform, over 120 companies have been listed so far.