Published on Thursday, July 5, 2018 by Dilip Davda
Recently some hurried actions were seen from BSE that has raised eyebrows for market participants. On 21st June 2018, BSE issues a circular for “New Platform to list “Startup” at BSE SME Segment” and mulled SME Startup platform launch on 09th July 2018 (its 143rd foundation day). While this news was carried by media till month end, on 30th June 2018 it issued a circular about “Postponement of launch of BSE Startup Platform” and thus it took market by surprise.
As per reports from the observers, till writing this, BSE did not find any application for the listing on BSE Startup platform. In fact, for this process, BSE tried hard to register at least one Startup but failed to do so and hence it postponed the launch.
But with this, there are murmurs in the market about hurried action by the oldest exchange and invited few questions that needs to be answered. As we all know, in 1994 OTCEI (Over the Counter Exchange of India) started with the similar purpose for listing of small ventures, but could not take off and finally witnessed premature death in 1997. Scrip listed on this exchange is still trying way out to list on other exchanges. Recently we have seen the case of OTCEI listed company Zim Laboratories Ltd. that marked Main Board listing at BSE in last month. On the other hand, we have seen the case of one ITP (Institutional Trading Platform) company i.e. Richway International Ltd. that failed to mark desire level of action on BSE ITP finally got delisted and entered on NSE SME Emerge for relisting with new name Suumaya Lifestyle Ltd.
Amidst all these happenings, few episodes like permission for SME listing to companies like Garv Industries Ltd. , U H Zaveri Ltd. with no financial track records of at least two years surprised one and all. While BSE officers have clarified that these companies were cleared for listing on the basis of their networths, it raises question on minimum financial track record aspect. Recent uproar is seen in the matter of Ganesh Film India Ltd., a company belonging to a group in the business for more than three decades, but this IPO aspirant has no track record of two years and has just minuscule performance and is looking at a price of Rs. 80 per share for its float.
According to market participants, not only exchanges, but also the Lead Managers have opted for quantity game instead of quality aspect of SME listing aspirants and have played a spoil sport for the recent subdued sentiment for SME IPOs. As per SME market participants, SME IPO pricing too has taken its toll and has raised a query about upper caps for pricing of SME IPOs. In their opinion, SME IPO pricing should be capped at a P/E of around 12 to 15 only in general and quality offers should have a cap of 20 P/E. As felt by the observers, BSE has some relaxed norms for SME listings compared to NSE. We have seen the case of Deccan Healthcare that originally mulled NSE SME Emerge listing, finally opted for BSE SME listing and tried to enter the market in the month of March 2018 withdrew the IPO even before opening. According to market sources, some declarations were not covered in the offer documents and hence, at last minute it stood withdrawn and has refilled DRHP (for third time).
So the market participants are opining that instead of starting new SME Startup platform, let SME platform rules and regulations be modified, as Startup platform is involving IPO process on the same guidelines of SME platform. Alternatively, let there be a mini version of ITP for direct listing of Startups and open up the gateway for OTCEI listed companies to get trading platform and such aspirant to follow the process to qualify for the same.
On one hand we had witnessed in the past suspension of four companies (in 2015) of SME platform on BSE, on the other hand, we have the case of first NSE SME Emerge IPO of Thejo Engineering Ltd. (2012) still remains on SME platform. In a bid to increase listing of SME platform, NSE has recently approved IPO of Bright Solar for listing. This company was blacklisted by state government authorities from their vendors list.
If SME platform is to be revived, let the exchanges give major thrust for quality IPOs and leave aside quantity game. After setting the things right, let them opt for new platforms like Startup, if at all it is desirable.
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
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