The Delhi Stock Exchange has set itself a target of mobilising 25-30 per cent of its business from MSMEs
Difficulties in raising finance for new investments may soon be a thing of the past for micro, small and medium enterprises (MSMEs), since the Delhi Stock Exchange Limited is gearing up to register MSMEs, to enable them to mobilise funds from the capital market.
The Delhi Stock Exchange (DSE), incorporated in 1947 as a limited company under the Indian Companies Act, 1913, has remained dormant for seven years. But it plans to revive its operations in November this year and has invested about Rs 40 crore in technological upgradation, manpower and infrastructure.
H S Sidhu, executive director and CEO of DSE, said that SMEs contribute about 30 per cent of the nation’s gross domestic product and are also the largest exporters. They can therefore contribute to the capital market in the same proportion, but they need to be given a boost through the offer of incentives.
Sidhu said that he was in touch with officials in the Union Ministry of Micro, Small and Medium Enterprises, and their response had been encouraging.
“We are contemplating relaxing some of the compliances for MSMEs that are a must for the big players. DSE can help the small players by arranging merchant bankers and project appraisals. As printing of quarterly results involves a financial burden, MSMEs can be allowed to publish their quarterly results on DSE’s website. The threshold limit of Rs 3 crore for paid-up capital will not be altered,” said Sidhu.
He said that DSE has set itself a target of mobilising 25-30 per cent of its business from MSMEs. He is in the process of obtaining feedback from representatives of various MSME clusters across India on their expectations from the ministry, after which DSE would prepare a report and present it to the ministry in two weeks, he added.
DSE, he disclosed, was in discussions with the 19 regional stock exchanges of India (all currently closed) with a view to concluding tie-ups with them, and the Ludhiana, Jaipur and Ahmedabad stock exchanges were likely to join them shortly.
DSE has 379 members and plans to add 100 by the end of the current financial year. Some 2,800 companies are listed on it. Since there has been no trading for over seven years, only 600 had complied with their obligations. DSE offered a 60 per cent rebate to those who paid their arrears, and 300 companies took advantage. Now 900 companies are eligible for trading on the exchange, Sidhu said.
“Currently we have trained manpower of 60 which is sufficient to run operations in the beginning, but the ideal headcount would be 150 once we expand after a few months,” he added.
Despite the absence of trading for the past seven years, DSE has a cash reserve of Rs 100 crore (interest income, listing fee and membership fee), Sidhu said. Once it functioned smoothly for six months, DSE would be allowed to foray into derivative trading, he added.
Sidhu said that Rs 500 crore of business would be the break-even point for DSE. One year down the line he expects a trading volume of Rs 1,000 crore and by two years he envisions that this should reach Rs 2,000 crore. The total market size for trading in India is Rs 1 lakh crore per day and DSE is eyeing 5 per cent of the total volume, he said.
The membership fee for a broker is Rs 13.17 lakh — negligible compared to other stock exchanges. A broker of DSE would also be a sub-broker of the Bombay Stock Exchange and the National Stock Exchange through its subsidiary, DSE Financial Services Limited, he added.
