Adityanath govt to encourage start-ups, SMEs to access capital market

UP has a large MSME base estimated at over 5 million, contributing 60% to its annual industrial output

Even as the Yogi Adityanath government has received big ticket investment proposals of about Rs 4.3 trillion at the recent UP Investors Summit 2018, the state is working on its agenda to encourage start-ups and Small and Medium Enterprises (SME) access capital market for growth.

The state government has now signed a Memorandum of Understanding (MoU) with the National Stock Exchange (NSE) for enhancing financing opportunities for SMEs by listing on NSE’s SME platform, NSE Emerge. The government wants the SME sector to rise to the challenges of rising competition and technology upgrade for boosting economic activity and industrialisation.

Traditionally UP SMEs have preferred to be privately owned entities rather than raising funds from the capital market by going public. However, in recent times there has been interest among these concerns to list on the stock exchange and brace up for future challenges brought about by globalisation and opening of the domestic markets.

UP has a large MSME base estimated at over 5 million, contributing 60 per cent to its annual industrial output. The sector directly employs about 40 million people, generating direct economic activity worth almost Rs 1.50 trillion annually. The sector is the second largest employment generator after agriculture.

Currently, NSE’s SME Emerge platform has 123 companies, including 3 entities from UP, including Reliable Data Services Limited (Noida), Jalan Tran Solutions (Ghaziabad) and Jet Knitwears (Kanpur). Recently, another Kanpur based company Tasty Dairy Specialities had also raised capital for listing on the NSE SME platform.

Under the MoU, the exchange would nurture UP start-ups and SMEs by creating awareness about the opportunities to raising capital, SME exchange guidelines, listing processes, compliances with listing agreement etc.

The start-ups seeking the state government help in this regard would be mentored by NSE regarding the capital markets, capital raising mechanism and regulatory compliances.

Besides, the state would explore the possibility of providing one-time financial assistance/subsidy to SMEs for the cost of public issue expenses subject to a ceiling to be predetermined from time to time. Besides, the government would explore the possibility of setting up a government-sponsored SME equity participation fund in partnership with nationalised banks.

The UP SMEs would be enrolled in NSE’s Capital Markets Program comprising physical & virtual participation in the scheme.

“NSE and the state government have agreed on the importance of the development of SME sector and improving the financing opportunities by listing on NSE Emerge,” UP Infrastructure & Industrial Development Commissioner (IIDC) commissioner Anup Chandra Pandey said.

“MSMEs need to adopt new age financing routes. The state has flourishing handicraft & handloom industries, leather industry, tourism industry and agro-industry etc. We are confident that the MoU would facilitate the SMEs meet their funding needs by listing,” state MSME & export promotion principal secretary Anil Kumar said.

“SMEs are crucial for economic growth, employment generation and broad-based inclusive development. We would provide access to capital to SMEs and look forward to supporting the sector in their growth and capital raising initiatives,” NSE MD & CEO Vikram Limaye said.

Listing helps companies to get better access to capital for expansion and growth, provides visibility to local companies at the national level, gives them high credibility and unlocks valuation.