India’s largest stock exchange – BSE is known to be the world’s fastest stock exchange with a speed of 6 microseconds and since 2012 it has had specific focus on the small and medium enterprise segment with its SME Exchange platform. In 2017, 54 new companies got listed on the BSE SME Exchange and the total market capitalisation is in excess of Rs 21,900 Crores. Small Is Big caught up with Ajay Thakur, Head – BSE SME to learn about the best SME IPOs of 2017, his growth plans for 2018, the impact that getting listed can have on an SME and more!
SIB: Raising capital is one of the biggest challenges for an SME. How does listing on the BSE SME Exchange help? How has the exchange evolved since its inception?
AT: Raising capital has always been always a challenge for SMEs which has been a major reason for their sluggish growth. BSE very well understood this issue and therefore launched the SME Platform in March, 2012. BSE SME Platform provides a great opportunity to the entrepreneurs to raise equity capital for the growth and expansion of their companies. It also brings visibility, transparency, corporate governance into the company which further enhances the credibility. It helps unleashing the valuation of the company and in the process create wealth for all the stakeholders.
Evolution of Exchange since Inception is as mentioned in the table below:
|27th November, 2011||BSE received approval for setting up SME Platform|
|13th March 2012||BSE SME Platform launched|
|13th March 2012||1st Company BCB Finance Listed|
|11th Feb 2014||BSE SME Platform launched Institutional trading Platform|
|14th December 2012||BSE SME IPO Index launched|
|29th April 2013||Event with Asian Development Bank on the Potency of Capital Markets for SMEs in India|
|6th March 2014||50th Company SI VI Shipping Corporation Listed|
|4th April 2014||Market Cap of BSE SME Platform crosses 1 Billion USD|
|11th July 2014||BSE SME been felicitated as the Best SME Exchange by Shri Kalraj Mishra, Hon’ble Union Cabinet Minister for MSME|
|12th July 2014||BSE SME receiving SKOCH Award for the best SME Stock Exchange in India|
|22nd October 2014||Signing of MOU with YES Bank|
|22nd October 2014||75th Company ADCC Infocad Limited Listed|
|12th December 2014||Market Cap of BSE SME Platform crosses 2 Billion USD|
|3rd February 2015||Delegates From Chittagong Stock Exchange Visited BSE SME Platform|
|14th September 2016||150th company Narayani Steels Limited got listed on BSE SME|
|5th October 2017||200th Company Trident Texofab Limited got listed on BSE SME|
SIB: At what scale should an SME be thinking of listing on the BSE SME platform and what are the requirements? What is the cost of listing?
AT: SMEs at any stage can think of getting listed if they meet the following criteria:
- The post issue paid up capital of the company should be at least Rs 3 Cr
- Net Worth (excluding revaluation reserves) of at least Rs 3 Cr as per the latest audited financial results
- Net Tangible Assets of at least Rs 3 Cr as per latest audited financial result
- Distributable profits in terms of Section 123 of the Companies Act 2013 for at least two years out of immediately preceding three financial years (each financial year has to be a period of at least 12 months). Extraordinary income will not be considered for the purpose of calculating distributable profits or the net worth shall be at least Rs 5 crores.
- No change in the promoter of the company in the one year preceding the date of filing
- Company has not been referred to Board of Industrial and Financial Reconstruction
As far as the costing is concern, BSE charges Rs.50, 000/- towards processing fee. Besides that there are other costs which the company has to negotiate with the Merchant Banker.
SIB: SMEs are often concerned about the complexities of the process and the paperwork required. Does BSE SME Exchange hold their hands through the process?
AT: There is no complexity in the process of listing. The merchant bankers do the hand holding of the promoters and they prepare the documents required for listing. The companies get listed within three months of signing the mandate with merchant banker. The post listing compliance is also on half yearly basis which is very simple and can be easily complied with. The companies which got listed are finding it very simple to do all the compliances. BSE SME Exchange wherever required, does the hand holding.
SIB: Today over 200 companies are listed on the exchange, what kind of impact on the bottom-line have the most successful ones seen?
AT: It has been observed that most of the companies have seen significant growth in their top line and bottom-line post listing and because of which their market capitalisation has seen good growth. We have seen transformation in all areas. The perception about the companies have changed, their visibility has increased with increase in number of clients, increase in credibility and access to finance. The companies have also adopted new technologies to enhance the efficiency.
SIB: Which are the best performing states as far as listing on the SME Exchange is concerned? Why?
AT: As of now Gujarat, Maharashtra and Delhi are the best performing states as far as listing on BSE SME is concerned. We think the major reason for these states to be more participative is because of their awareness about equity capital.
SIB: What is the kind of mind-set change that is needed within an SME promoter to take his/her business through listing?
AT: We have observed that promoters are wary about the increase in compliance post listing. There has been a misconception that post listing there will be substantial increase in compliance. However, now we are observing that awareness is increasing and therefore promoters are coming forward to get themselves listed.
SIB: What is your biggest challenge in getting more and more SMEs to join the BSE SME bandwagon?
AT: The biggest challenge in getting more and more SMEs to join BSE SME is that the promoters lack awareness about the capital market. Also we have found that many of the promoters have the fear that post listing compliance may increase manifold and as they don’t have the bandwidth so they may not be able to comply with those norms. Also some of them have the fear that they become the target for takeover. Through seminars and one to one meetings, we are trying to allay those unfounded fears and are making the promoters understand the benefits of listing. We hope that with the increase in awareness among the promoters there will be more and more companies coming on BSE SME bandwagon.
SIB: What other specific strategies are you adopting to promote awareness amongst SME promoters? Are you tying up with industry bodies?
AT: We as an exchange understand the importance of SMEs to the growth of Indian economy. Hence, we are holding seminars and conferences along with various industrial associations viz FICCI, CII, ASSOCHAM, FISME and various other industrial bodies. We are also having seminars with ICSI, ICAI and other professional associations like D&B, India SME Forum, SME Chamber of India and Merchant Bankers. We are also using both view media and print media to reach to the SMEs. Besides this we are also having meeting with SMEs on one to one basis to make them aware about the benefits of listing on SME Platform. Till now BSE SME has done around 1000 seminars across the country to create awareness about the platform and met 20000 promoters.
SIB: What are some of the biggest and best SME IPOs that happened on your exchange in 2017?
AT: Meera Industries Ltd, Share India Securities Ltd, Trident Texofab Ltd, Sheetal Cool Products Ltd, IRIS Business Services Ltd, Shreeji Translogistics Ltd, Sanghvi Brands Ltd, Dynamic Cables Ltd, Sarthak Metals Ltd are some of the best SME IPOs on BSE SME Platform
SIB: How many more companies are expected to get listed in the next few months? What is the long term vision?
AT: We are expecting around 100 companies to get listed in the year 2018. In five years we want to take the SME exchange across the country with participation from all the states. We want to have at least 5000 SMEs to get listed on BSE SME Platform and create wealth for all the stake holders.