Part 3 - SMEs Stock Market Listing Benefits Explained

Published on Sunday, January 17, 2016 by Dilip Davda | Modified on Thursday, April 20, 2023

We in earlier two chapters, we saw the arenas and hindrances for the SMEs. Now we will see the benefits of listing of SMEs on the exchanges.

To create awareness of listing benefits, merchant bankers, stock exchanges, banking industry and rating agencies have been severally and jointly conducting seminars and events for the said subjects and have done remarkable job in last three years. Following are the inputs from various seminars of the concerned parties for the benefit of SMEs and others.

More from this series:

1. Part 1 - SMEs in India - Current Status & Hindrances
2. Part 2 - Financing of SME remains main hurdle
3. Part 3 - SMEs Stock Market Listing Benefits Explained

According to feedback from merchant bankers and exchanges, to protect their intellectual assets, business secrets and controlling stake, SMEs were reluctant to come forward for the listing of their companies. They preferred to be self guarded against any unwarranted situations. But with detailed discussions and recommendations, SMEs have opened up for their maiden floats via IPO routes. Resultantly we have seen around a dozen IPOs listing on NSE Emerge and around 120 IPOs on BSE SME. For NSE Emerge, there are 29 Market Makers for SME IPOs where as on BSE SME there are 93 Market Makers. List of merchant bankers is tiny compared to main board intermediaries. In the SME segment, we have just two main board merchant bankers appearing in the list for SME IPO mandates, i.e. IDBI Caapital Ltd and Keynote Capital and the rest have specialized SME servicing that includes Pantomath Capital, Sarthi Capital, Hem Securities as the front runners and others having few mandates in past three years.

With the listings, not only the fund raising, but also unlocking of enterprise value and other listing credentials have helped many recent IPOs to enter the capital market via SME route and then migrate to main board.

In the recent AIBI Summit 2015, following were the expert's comments:

Takes from aibi Summit 2015

Association of Investment Bankers of India (aibi) recently had its 5th summit wherein major investment (merchant) bankers participated to take a note of changing times. This summit was graced by Sebi Chairman U K Sinha. Whole day event had many takes for the securities market. Few important ones are listed below:

1. U K Sinha -Chairman SEBI

   Merchant bankers have to gear up for helping startups and arrange fund raising for them. They should also see how they can help top 500 listed corporate in managing funds for their idle capacities of about 29% which needs funding for running at full capacities. As many merchant bankers are not active in SME segment, they have to look at this as well. IPO market has yet to gain momentum as this calendar year only 56% IPOs quoting above offer price post listing. SEBI has totally done away with Safety Net. New IPO norms will be effective from 01.01.2016.

2. Ashish Chauhan - MD-BSE

   BSE has recently introduces price mechanism and wants to curtail speculative aspects by scrupulous operators. It has also formed SME exchange about three years back and has 117 listed entities having market cap of over Rs. 8000 cr. It mulls listing of 500 SMEs going forward in coming few years.

3. Mr Bhupen Dalal - Chairman CIFCO

   In late seventies there were only four broking houses that ventured into merchant banking. This industry has gone long way and today has more sophisticated players including foreign investment bankers. Despite this, we are missing the clout of those old times when we have seen above 250 plus IPOs a year. Lot needs to be done on free pricing that is taking its toll.

4. D R Dogra - MD & CEO - CARE Ratings

   For SME platform, many banks are reluctant in financing and hence rating of this sector has immense importance. Encouragement to SME sector will definitely help in GDP growth going forward.

5. Harshad Thakkar - CMD Ashapura Intimate Group

   Listing at SME platform has unlocked our group value. However, trading lot for SME listing needs to be re-visited as it is not in tandem with the industry desire. Ashapura Group was the first to have BSE and NSE maiden IPOs and has tested the benefits.

From the above, one must notice that the only grievances for the SME entrepreneurs is the minimum entry level and resultantly the confined tiny stakeholder's list.

These issues have been at the discussion table of committees at SEBI and the Exchanges and some investor friendly measures are expected very soon in this regard.

Read More...

• The Process of SME IPO - Step-by-step Guide to Schedule IPO
• SME IPO - Cost of Fundraising (Fees & Expenses)
• SME IPO Listing - Key Requirements & Eligibility Norms
• Post Listing Compliance for SME Platform
• Part 1 - SMEs in India - Current Status & Hindrances
• Part 2 - Financing of SME remains main hurdle
• Part 3 - SMEs Stock Market Listing Benefits Explained