Regulatory panel to mull changes in SME framework

Market regulator's meeting likely to take place on October 30

The Securities and Exchange Board of India's (Sebi's) 18th member advisory committee on the primary market is likely to discuss further changes to fund raising through the platform for small and medium enterprises (SME).

The committee may consider a greater role for institutional players in such initial public offers, according to a person familiar with the matter. The issue is likely to be discussed at the Sebi Primary Market Advisory Committee meeting, to be held later this month on October 30, said the person.

 "It is much easier to get institutional participation in an SME initial public offer (IPO). There is a feeling that a provision should be there to help them play a bigger role in such fund raising," said the person.

If pushed through, this would be the latest in a series of moves designed to help such companies raise capital.

The government has been looking to create an easier fund-raising environment for smaller companies. The finance minister in his budget speech on February 28 announced that SMEs and start-up companies will be permitted to list on the SME exchange without being required to make an IPO, but the participation will be restricted to informed investors.

On Wednesday, Sebi laid out a regulatory framework allowing SME to list without an IPO. The regulator had also earlier expressed willingness to consider easier norms for underwriting and market making.

The listing of an SME comes with compulsory market-making and underwriting obligations. The former ensures liquidity for the listed securities while the latter is to ensure minimum subscription for the issue.

An earlier Sebi discussion paper on SMEs noted that they account for a fifth of the country's economic output and said that it is the largest provider of employment in the country. An email query sent to the regulator did not immediately receive a reply.