Separate bourses for SMEs by March 2009
The Securities and Exchange Board of India (Sebi) is in the process of finalising the guidelines and procedures for setting up of smaller exchanges. These would cater to the financial requirements of SMEs.
TC Nair, whole-time Member, Sebi said separate stock exchanges for the SME sector in India on the lines of the Alternate Investment Market in London will be set up by the end of this fiscal year.
With the setting up of exchanges, SMEs, that till now could raise money either through debts or private equity, could mobilise resources from the stock market as well.
Addressing the Assocham conference on financing the Future Giants here today, TC Nair said that in the initial phase, 3-4 licences will be provided to the companies with a net worth of Rs 100 crore.
Nair added the proposed stock exchange should be set up as corporate entity from inception. It shall later convert into a demutualised entity and comply with the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognized Stock Exchanges) Regulations, 2006, within a specified period (within a year or two) from the date of commencement of the exchange.
Nair said the global turmoil was the biggest threat to small and medium enterprises, whose contribution has been as high as 47 per cent to the manufacturing sector. As a result there was an urgent need to develop a mechanism to extend a special package to the SME sector to enable them to meet export requirements, and to help them upgrade their technologies to face increasingly tough competition globally.
Nair maintained that the proposed exchange would be different from existing stock exchange in terms of companies raising capital and investors investing money in such companies. Sebi has fixed the minimum trading lot at Rs 1 lakh and the trading system may either be order driven or quote driven. The settlement may either be on rolling, trade for trade or call auction basis. The proposed exchanges would have nationwide trading terminals and an online screen-based trading system, which also has a suitable business continuity plan including a disaster recovery situation.
Commenting on the current global turmoil, Nair maintained that the downswing in the stock market was opportunity for the investors and there was no reason for panic.
Dispelling fears that the exit of foreign institutional investors was a major cause for choppy markets conditions in the Indian capital market, Nair said that as compared to 1,100 FIIs operating in India in October 2007, the number had risen to 1,500 FIIs now.