Livemint: December 15, 2014
Mumbai: Nearly three years after the BSE launched a separate platform for small and medium enterprises (SMEs), the market capitalization of the segment crossed Rs.10,000 crore for the first time on Friday.
The market capitalization of the 82 listed SMEs was Rs.10,118.90 crore on Friday, BSE data shows.
Both BSE and the National Stock Exchange of India Ltd (NSE) launched their SME segments in March 2012. While BSE has 82 companies listed on its SME platform, NSE has six. The market capitalization of the six companies listed on NSE's SME segment called Emerge is nearly Rs.410 crore.
To be sure, while BSE has 82 companies listed, not all are traded on a daily basis. On Friday, only 28 companies saw their shares being traded on the exchange, out of which 10 saw their prices gain and 16 saw a decline. Share prices of two companies remained unchanged.
The SME segment has been gaining steady traction in terms of listings, said Ashishkumar Chauhan, managing director and chief executive officer, BSE. Another 16 companies are in the process of getting listed, he said.
NSE declined to comment.
According to regulatory norms, companies that wish to be listed on the SME segment need to file a draft document only with the stock exchange and not with the Securities and Exchange Board of India (Sebi). This has made it easier for smaller firms to raise capital via the platform and also familiarize themselves with the regulatory requirements for listed entities in a staggered way.
Uday Patil, director, investment banking, Keynote Corporate Services Ltd, an investment banking firm, which has helped three companies list on SME platform, says the segment is a good avenue for companies to get used to the disclosure, corporate governance and regulatory requirements, which will help them to migrate to the main segment.
However, since some of these companies can be high-risk bets, Sebi has kept small retail investors out of the segment by pegging the minimum trade value at Rs.1 lakh. As such, the typical investors on the SME platform include wealthy individuals along with domestic financial institutions, private equity firms and venture funds.
The capital market regulator has also made merchant bankers more accountable by making them underwrite 100% of the offer, apart from compulsory market making for a period of three years post-listing.
Underwriting refers to bankers buying any unsold shares while market making makes it mandatory for bankers to offer, buy and sell quotes to any entity looking to either invest or exit the company.
The increased interest in the SME segment can also be gauged from the fact that the 82 listed companies collectively raised only Rs.665 crore at the time of listing, but have seen their current market capitalization crossing Rs.10,000 crore.
Companies like Looks Health Services Ltd, Max Alert Systems Ltd, Sangam Advisors Ltd, Jupiter Infomedia Ltd, Jointeca Education Solutions Ltd, SRG Housing Finance Ltd, Comfort Commotrade Ltd, Anshu's Clothing Ltdand Ashapura Intimates Fashion Ltdhave seen their share prices more than double since listing between 2012 and 2013.
Market participants, however, say that some caution should be exercised while dealing in companies where disclosure and corporate governance standards are less stringent compared with bigger companies.
"While one can hope for larger participation and faster growth for a segment that is India's mainstay, it is time that the market should start looking at parameters like sales, profitability or growth and not just market capitalization," said Arun Kejriwal, director of Kejriwal Research and Investment Services Pvt. Ltd.
The success of the SME platform in India assumes significance as there are not many instances of a successful separate platform for SMEs across the globe. Alternative Investment Market (AIM) platform of the London Stock Exchange continues to be the most popular, with over 3,000 listings since its launch in 1995. South Africa and Brazil also tried but achieved little success.
"We continue to focus on SME companies for providing them an easier capital raising platform which can help them in their expansion and growth," said Chauhan.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.