With the SME Exchange of the Bombay Stock Exchange (BSE) set to be launched after Diwali, Ashok Monga, the managing director of Rhydburg pharmaceuticals, a Dehradun-based small company, is busily studying the nitty-gritty of planning an initial public offer (IPO) to raise capital.
Monga has already held talks with Lakshman Gugulothu, CEO of the BSE SME Exchange, during an awareness session organised by the Confederation of Indian Industry (CII) here. “As of now, we are studying various aspects associated with the IPO,” said Monga.
Rhydburg is among several companies interested in raising equity capital to finance growth. According to Gugulothu, 50-60 SMEs are ready to raise equity capital by launching IPOs through the new exchange. The entrepreneurs are from small towns and cities like Meerut and Muzaffarnagar in Uttar Pradesh, Dehradun and Haridwar in Uttarakhand, and Jammu in Jammu & Kashmir, among others.
Companies like Sarweshwar Basmati Rice in Jammu and Silver Ton in Muzaffarnagar also plan to raise equity capital through the new exchange.
“The BSE SME platform provides a great opportunity to small entrepreneurs to raise equity capital for growth and expansion. It also provides an immense opportunity to investors to identify and invest in good companies at an early stage,” said Gogulothu.
“We are targeting small industrial towns and cities like Pantnagar, Dehradun and Haridwar in Uttarakhand to encourage them to raise capital through the SME Exchange,” said Gugulothu.
The SME Exchange offers some relaxations. SMEs with a post-issue paid-up capital of up to Rs 25 crore can list on it. Issues on this platform will be 100 per cent underwritten and merchant bankers will underwrite 15 per cent on their own account. Also, there will be three years’ support in the secondary market through market making activity.
The shares to be listed under the new exchange will be categorised in a new list at the BSE regular exchange. There will also be safeguards against hostile takeovers in the SME exchange, Gugulothu said.
The CII has welcomed the new initiative. “SMEs in India play a vital role in the development of the country, as they contribute 45 per cent of industrial output, 40 per cent of exports, employ 60 million people and creat 1.3 million jobs every year. The SME Exchange is just what was needed to support SMEs to access capital,” said S Farooq, chairman of CII’s Uttarakhand state council.
