Orissa to set up stock exchange for SMEs

Companies with a paid-up capital of less than Rs 3 crore will be able to raise money at the exchange.

The small entrepreneurs in Orissa are quite upbeat on the idea of Bhubaneswar Stock Exchange (BhSE) floating a Small and Medium Enterprise Exchange (SMX) in the state.

"It will definitely help the development of this moribund sector," feels Bibhuti Mohapatra, president, Orissa Small Scale Industries Association. Apart from making the process of listing easier for the small enterprises, it can ensure participation of the small investors in the stock market, he added.

Says Mohapatra, "The fund-starved SMEs can avail the opportunity to raise funds for expansion and diversification. Besides, the small investors who were investing in large companies and banks will have the option of investing in the equity shares of these small units".

He argued, "The shares of large companies are showing greater fluctuations and there is a possibility of losing the money in case of a crash in the stock market. In a way, the investor's interests will be better protected in the SME exchange as the prices of shares of these companies do not undergo such wide fluctuation. Besides, the investors will find it attractive to invest in these shares as the entry level price will be quite low".

His views are echoed by Sarat Panigrahi, the managing director of Innotech Powders Limited, which has its manufacturing unit at Rourkela.

Says he, "The proposed SMX can help boost the industrialisation process in the state and provide a platform to the small and medium units to raise capital. Since the SMEs are local based, the proposed exchange will help them to trade locally instead of going around the big exchanges. Moreover, the companies whose paid-up capital is less than Rs 3 crore will get the chance to enter the capital market."

Stating that this is a stepping stone for the SMEs in Orissa, he said that once their shares are traded, the SMEs will be better known and the units will be more accountable.

Besides, trading of shares will lead to enhanced confidence among the lenders and the investors. So the enterprises will be able to source funds for themselves without any interest burden.

The consultants engaged in arranging funds for the small units from the secondary market are also very optimist about the utility of the proposed SMX. They point out that this will be beneficial for the existing as well as the future Small and Medium Enterprises of Orissa.

"This will act as another OTC where the sound SMEs can list their shares and trade it to reap the benefits of the rapid industrialisation drive in the state", says Sidheswar Sahoo, Orissa head of the Kolkata-based consultancy firm, Resurgent India.

After the exchange comes up, there will not be any need for small units to run to bank or financial institutions to meet their capital requirements at a higher rate of interest, he added.

Sahoo said, SMX will be another source of money supply and sky is the limit if one's performance is healthy. It will be a blessing in disguise for those exporting SMEs who face financial crunch to meet their delivery targets.

However, there are some dissenting voices as well. According to Niranjan Mohanty, president, Utkal Chamber of Commerce and Industry (UCCI), unless the details are worked out it will not be possible to asses the impact of the proposed SMX.

Since the volume of trading will be low, the concerned SME will have to take a decision based on viability as to whether to go for public offer or not. This is because, going for public offer also involves some cost, he pointed out.

It may be noted, that the Bhubaneswar Stock Exchange (BhSE) is in discussions with the other stock exchanges and the Securities Exchange Board of India (SEBI) in this regard.

The idea is floated in the backdrop of massive growth potential for the SME sector in Orissa in the wake of huge investments, running into over 4 lakh crore rupees, lined up in the core and infrastructure sectors like steel, aluminium, mineral processing, cement and energy.

The state had 37,408 registered small scale industries (SSI) units by March 2006 with a combined investment of Rs 1,257.85 crore. It employed about 2,98,699 persons with per unit investment of Rs 3.36 lakh.