The stage is set for the launch of the SME Exchange by the Bombay Stock Exchange (BSE) in September, but most of the potential beneficiaries do not seem to know about it.
The growing cost of funds due to the tightening of liquidity by the Reserve Bank of India has forced SMEs to look for alternative sources of long-term funds, and public money can be a viable option. However, it looks like an uphill task for promoters of the BSE SME Exchange to disseminate information about it to the target audience.
When approached by Business Standard, even prominent industry associations such as SIMA (South India Millers’ Association), Roller Flour Millers Federation of India, Chandigarh, Industrial Fasteners Association, Haryana Chamber of Commerce and Industry and chartered accountants across India had little inkling of the details of the initiative undertaken by the BSE for SMEs.
K Selveraj, the secretary general of SIMA, said it would have been “wonderful” to raise funds from the equity market, since the cost of borrowing from banks has gone through the roof. But there had been no communication from the BSE SME Exchange to the association on this initiative, he remarked.
SIMA has over 450 members in the four states of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala and the Union Territory of Puducherry running spinning mills, and their working capital requirements are substantial.
Acknowledging the need for a dedicated SME exchange and its utility for small IT companies, Omkar Rai, senior director of the STPI (Software Technology Parks of India), said small businesses need funds in small quantities at a reasonable cost. The SME exchange could certainly help them. There are about 7,000 IT companies working under the umbrella of the STPI and over 70 per cent of them are small enterprises. But STPI had not been approached by any agency to collaborate with the BSE to help make the SME Exchange work, he said.
The Roller Flour Millers Federation of India has over 1,150 members across India, engaged in wheat processing. The senior vice-president of the federation, Adi Narayan Gupta, said from Ghaziabad that so far no communication has been received from any BSE official.
According to A L Aggarwal, the general secretary of the Haryana Chamber of Commerce and Industry, information should be disseminated at the grassroots level, because a large number of SMEs belong to the category of micro industry. “If given an opportunity we can apprise policy makers at the BSE about operational glitches, ground realities, hurdles, and pros and cons of the situation. But there has been no initiative on their part,” he said.
The BSE SME Exchange proposes to drop quite a few pre-requisites to enable small companies to raise money from the public. The three-year profit making criteria, approval from Sebi and 100 per cent underwriting of issues have been dropped. The merchant banker can directly file the red herring prospectus with a due diligence certificate and the exchange’s approval, and this will save almost six months.
Instead of quarterly results, SMEs need publish only half-yearly results, while soft copies of the annual results can be e-mailed to shareholders. This is expected to substantially cut the cost of compliance for SMEs.
Talking to Business Standard, the CEO of the BSE SME Exchange, Lakshaman Gugulothu, said that the exchange was faced with an uphill task. There are over one million SMEs and even if 100 come forward in the first year, it would be a rewarding exercise, he said.
“We have adopted a multi-pronged strategy to reach out to SMEs and chartered accountants. We are sending brochures and tying up with media houses to disseminate information. If need be, we will further concentrate on outreach initiatives to address larger sections of the small entrepreneurs,” he said.
