Decade Of SME Exchanges In India… Need For More Confidence Building Measures

The SME Exchanges the world over may be considered in their infancy. But the experience they have provided are indeed tremendous. A 10-year period, in India, is enough to measure the performance on the parameters. The way BSE and NSE works, the listing processes, the aggression. the competition, etc. Truly, our exchanges are so different from each other. Their consumers gain from this.?

The Government may not be fully satisfied with the performance of SME Exchanges. In India, there are 63 million MSMEs. All strapped of cash most of the time. Yet, there were about 620 SME IPOs in total. The back-of-envelope calculation reveal the true picture. Of the 63 million, consider 90% as one-person companies. Of the remaining 6.3 million, consider 90% as not eligible as their books are not in order or for some other reason. Or the remaining 63,000 consider 90% as traditional thinkers not akin to go for an IPO. Still there are 6300 companies!

In the best year (1988) only 141 Companies floated their IPOs. The country that has 29% of GDP and has 42% of jobs secured by her MSMEs surely can do little more. Canada, which has her total population lesser than those MSMEs in India, has more companies listed on her SME Exchange. Chinese Taipei also has more companies listed than India.?

SEBI can do very little that what it has already done. Stricter secondary market regulations. seeing to it that trading does not go out of control, the Market Maker, et al. Some say that the restrictions are a bit too much. But with a past experience of Over the Counter Exchange of India (OTCEI), it is only natural that one is extra cautious. As a regulator, you need to consider may aspects of such decisions.?

The fact is that this is the best way to raise resources the alternatives are either too expensive or cannot be reached by a majority of them. Being small enterprises listed, SME exchanges strive to find the balance between reducing direct and indirect costs to issuers and ensuring appropriate investor protection. Also, it is a given truth that the liquidity of SME platforms is definitely a challenge, disincentivizing the large investors.?

It is the sad fact that our culture puts taking the Company public more like selling family jewels. It is also true that many entrepreneurs do not like the extent of disclosures sought ?in this process for reasons.?

Surely, it is all a matter of education. ?But it is also a form of Atmanirbharta. Our industry is capable of taking care of itself and not dependent on large governmental dollops of help, as in Covid 19 pandemic.

As a vendor of these IPOs, having been associated since the first SME IPOs on BSE SME and NSE Emerge Exchanges and with a substantial experience in the past 10 years, I can say that very little has changed in the Market on the insecurities of the promoters, merchant bankers, investors, quality of Companies, quality of investors, etc. We are getting the Companies, into the SME listed space, who do not really need capital for their growth and come into the market for other reasons. Putting the onus on Investors alone is unfair in the wake of a long rope given by the government.?

For SME Exchanges, growth and indeed survival would largely depend on the governmental initiatives and innovations to encourage more Companies and Investors participate in these Exchanges. We need more confidence building measures.

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Sushil Bahal is Managing Director of Raka Reputation Management Services Pvt. Ltd., a 20-year old, Mumbai based PR and Advertising company offering integrated communication solutions and maximum reach across 83 top media regions across India. Raka Reputation has experience across sectors, particularly Banking, Financial Services, Healthcare, Hospitality, Education, Lifestyle, Manufacturing, Technology, etc. Raka Reputation has been associated as a communications partner to some of the most complex challenges and nearly 250 IPOs.

Please visit our websites?www.rakareputation.com?or?www.rakapronline.com?for any further information.?Sushil can be contacted on?[email protected].