Now a bourse for small firms

The setting up of a new platform for trading of stocks for small and medium enterprises (SMEs) is being mooted, even as the current platform, Indonext, flounders.

"While the logic behind Indonext was that it would be a platform where small and medium sized enterprises (SMEs) can access the capital markets, it has not really taken off. An alternative platform needs to be set up," said V Ramu Sharma, chairman, Federation of Indian Stock Exchanges.

Indonext was launched in January 2005 as a separate platform on BSE, exclusively for SMEs.

It was expected to bring liquidity to scrips that were listed on the regional stock exchanges. BSE, Federation of Indian Stock Exchanges and 18 regional stock exchanges have promoted IndoNext, and it had 350 scrips listed on it, at the time of launch.

Market surveillance, clearing and settlement were to be carried out by the BSE, while the regional stock exchanges (RSEs) looked after the listing norms for companies trading on this platform.

However, it is understood that BSE members were reluctant to allow free access to brokers of RSEs to trade on a BSE platform as this was viewed as a move that would dilute the value of a BSE membership.

As phase one of the launch of Indonext, securities of companies, with paid-up capital between Rs 3 crore and Rs 20 crore, listed on RSEs but not on BSE, were to be transferred to IndoNext.

However, the next phase of the project is yet to be implemented as there is no interest by SMEs to list on Indonext, according to industry sources.

The Federation of Indian Stock Exchanges believes that a successful trading platform for SMEs should not form a part of NSE or BSE and should be outside of these large exchanges.

Exchange sources say that turnover on Indonext is much below what was projected.

Also, the platform is not attracting new companies and the incremental number of scrips in Indonext, 16 months after its launch is minimal, according to them.

Companies, on the other hand, have been struggling to cope with listing requirements on the platform and cost of compliance is seen as a debilitating factor, say market experts.