How government is facilitating stock exchange listing of MSMEs

The Micro, Small and Medium Enterprises (MSMEs) are often considered a harbinger of growth in an economy. World over, governments have recognised the role and importance of the sector that constitutes nearly 90 percent of the total enterprises in most of the economies and are credited for generating the highest rates of employment growth and account for a major share of industrial production and exports.

The biggest challenge being faced by these enterprises is access to capital.

To overcome this, most major capital markets have established a separate exchange for SME segment. The purpose of separate SME bourses is to create an SME friendly market architecture which with support of effective policies and institutions fosters a new class of investable equities.

In 2012, BSE and NSE launched BSE SME and NSE Emerge which allowed SMEs to list on the BSE and the NSE and later migrate to the main board of the bourses without the need to make an initial public offering.

The key difference between listing on the main board and these platforms is the strict eligibility criteria of the former. Additionally, the requirement of track record, cost, corporate governance norms, reporting requirements and time frame for listing is quite relaxed for SMEs compared to companies listed on the main board.

Since the launch over 320 companies have been listed on the platform that not only provides benefits to these companies but also benefits its investors by providing an exit route to private equity investors as well as liquidity to the ESOP holding employees.

It also helps in maintaining sustainability through good corporate governance, generate an independent valuation of the company and also build the company’s profile with customers, suppliers, investors and media alike.

In May 2020, the BSE reduced the annual fee for listing on BSE SME by 25 percent to encourage small businesses to list and support them amid COVID-19 crisis.

The relaxation was preceded by centre’s Rs 50,000 crore equity infusion plans for MSMEs through Fund of Funds to also encourage entities to list on the main board of stock exchanges.

“A fund of funds being created for infusing about Rs 50,000 cr as equity into MSMEs. This will benefit those MSMEs who have the potential and are viable. The corpus of the fund will be of Rs 10,000 crore,” the finance minister had said.

Earlier this month, MSME Minister Nitin Gadkari said the government is looking at a specially created “MSME Stock Exchange”, which will have such small businesses listed on it. The government will provide equity of 15 percent to those businesses which list on the platform.

Written by Rakesh Sashmal