SMEs listed on BSE see 11% fall in five years

Contribute a daily trading turnover of around 10 per cent.

The number of small and medium enterprises (SMEs) — defined as companies that have net sales of less than Rs 350 crore — listed on the Bombay Stock Exchange (BSE) has fallen by around 11 per cent in the last five years. The number of SMEs currently listed on BSE is 3,174, and they contribute a daily trading turnover of around Rs 505 crore.

Experts says that investors are wary of looking at value SME stocks, since the stock exchanges view these companies with suspicion while applying surveillance measures. This has affected turnover on BSE, compared with the National Stock Exchange (NSE).

According to BSE data, the number of scrips listed on the exchange is currently 7,887, of which 2,814 are SMEs (based on the latest half-yearly results sourced from Capitalline), compared with 3,174 five years before. Some 83 per cent of the listed SMEs have a paid-up capital of Rs 25 crore or less, and 58 per cent have a paid-up capital of Rs 10 crore or less.

BSE’s daily trading turnover — in the cash market — is around Rs 4,723 crore, of which the trading turnover of SME scrips is around Rs 505 crore. Ritin Shah, an analyst at CNI Research Limited, said that in the last few years the number of SMEs had fallen by more than 500. He added that retail investors were always worried about investing in SMEs, since there were no rules for the surveillance of these companies by the stock exchanges.

“There is no guarantee for the segment in which these stocks will remain, any time these stocks may get transferred to trade to trade and the powers are conferred on exchanges. Also, there are no set rules for de-listing of SME stocks for particular scheme such as arrangements, mergers, de mergers and the period up to which these stocks can remain in limbo for delisting.”

Investors are wary of looking at value SME stocks, as in most cases the stock exchanges view these companies with suspicion while applying surveillance measures. This has affected the turnover in BSE very badly as compared to NSE, he added. No major advantage as even going public (FPO) is very difficult for SME companies, said Shah.

However, a business outlook survey conducted by the Confederation of Indian Industry (CII) has revealed that the micro, small and medium enterprise (MSME) sector in the country will be increasingly looking at non-traditional sources of finance.

The industry chamber said that 10 per cent of the respondents prefer the capital markets, 12 per cent used credit guarantee schemes while eight per cent are turning to venture capital as an alternate source of finance. About 52 per cent respondents viewed the credit guarantee fund launched by the Small Industries Development Bank of India (SIDBI) for guaranteeing loans up to Rs 50 lakh as a substitute for collateral security.

V Nagappan, chairman of MSE Institute of Capital Markets (MSEICM), agreed and added that if there was a less expensive route for SMEs, then retail investors would look at investing in SMEs and they would also gain. “Currently they are denied opportunities to invest in SMEs due to the price factor.”