The National Stock Exchange (NSE) is all set to take on the Bombay Stock Exchange (BSE) in the small and medium enterprises (SME) segment. The NSE, which will make its debut in the space nearly five months after BSE saw the listing of the first SME IPO, has modelled the platform on the lines of London’s Alternative Investment Market (AIM) and the NASDAQ of the US.
To ensure higher market participation, NSE says it has worked to create an eco-system and will allow companies with strong fundamentals to list on its platform. Even though grading for SMEs is not mandatory, NSE emphasis that SMEs opt for it, will instill confidence among investors. NSE has a tie-up with rating agency CRISIL.
Ravi Tyagi, the head of NSE’s SME project said, their emphasis will not only be on the number of IPOs but on a strict check on quality of companies. “Initially, we are ready to hand hold SMEs and facilitate them with means that will ensure high investor participation. We want to ensure that companies coming on our exchanges are run by a professional management team.”
The first IPO on Emerge, as NSE calls its SME platform, will be a Rs 21-crore issue by Chennai-based Thejo Engineering, which opens for subscription on September 4. The IPO has been graded 5/5, indicating strong fundamentals of the company.
According to Sebi, SMEs are allowed to raise as less as Rs 5 lakh and up to Rs 5 crore. Any company whose post-issue capital has a face value of between Rs 50 lakh and Rs 10 crore can list on the SME Exchange. Companies with post-issue capital exceeding Rs 10 crore but less than Rs 25 crore can choose to list on either the SME Exchange or the main exchange. Companies with capital of over Rs 25 crore will have to list on the main board.
Another strategy by NSE to boost investor confidence is to see that every SME has nominated investors, mainly institutional players. “Institutional players invest after adequate due diligence. If we ensure that every SME on our platform has institutional players as stake holders, it would be that much efficient for other small investors,” Tyagi said.
NSE has played a role in setting up an alternate platform for SMEs to raise funds ahead of listing, known as India Venture Board. It is supported by many venture funds .
“Behind IVB is the belief that there is a need for significant increase in the flow of venture capital and early stage investments in India. This is not only critical for the country but also for the overall equity ecosystem; a surge of innovation-based high-growth enterprises will provide feeder stock to bigger venture capital and private equity funds and finally to the public markets,” says the website of IVB, which also carries the logo of NSE and SIDBI
The BSE’s SME platform, till now, has helped five companies raise Rs 33 crore. This apart, five other companies will soon launch their IPOs on BSE. Tyagi says there are four SME IPOs, which are in different stages of getting finalised.
According to rough estimates, there are more than three million SME companies in the country, which account for nearly 50 per cent of industrial output and over 40 per cent of India’s total exports. Stock exchanges (SEs) will witness intense competition as they attract them to list on their platforms.
