Small and medium enterprises (SMEs) are increasingly looking at equity as an option for funding growth. Industry players say initiatives taken by the government and exchanges have made the equity fund-raising route more accessible for the country’s burgeoning SME sector, which is largely dependent on bank funding.
In the first two months of 2017, there have been 10 initial public offerings (IPOs) worth Rs 135 crore on the SME platforms of the National Stock Exchange (NSE) and BSE. In comparison, there has been only one IPO on the main board, while no primary capital raising. The pace of new listings is likely to accelerate with more than 50 companies lining up before the exchanges with their fund-raising plans.
About 36 SMEs have approached BSE SME, while about 15 are eyeing listing on NSE Emerge, the SME platform of the country’s biggest exchange.
BSE SME has given the go-ahead to 28 companies, while eight have filed their offer documents and are awaiting approvals. Some of these companies are Trine Entertainment, Monarch Apparels, Shareway Securities, Octaware Technologies and Perry Impex.
Meanwhile, NSE Emerge granted approval to four companies, which are Aakash Infrastructure, Sanginita Chemicals, Shree Ram Switchgear and RKEC Projects. Focus Lighting and Fixtures, Bohra Industries, Euro India Fresh Foods and Jalan Transolutions have filed their draft prospectus.
The companies eyeing to list are from sectors like apparels, chemicals, fertilisers, pharmaceuticals, realty, infrastructure and capital goods. Most of the companies are from Gujarat followed by Rajasthan and Maharashtra.
Investment bankers say encouraging participation in some of the recent IPOs bode well for new listings. Some of the SME IPOs this year saw record subscriptions.
Global Education’s Rs 10-crore IPO was subscribed 82 times, generating demand worth around Rs 840 crore. Krishna Phoschem’s Rs 20-crore IPO too saw a subscription of 33 times.
Exchange officials say SME-focused funds set up by the central and state governments are helping start-up listings. The government of Maharashtra and the Small Industries Development Bank of India (Sidbi) have jointly set up one such fund, which has invested in four SME IPOs on the NSE’s Emerge platform. A similar fund is also set up by the West Bengal government.
Both the NSE and BSE are talking to several state governments to help with SME IPOs. The framework for a separate SME platform was approved by the Securities and Exchange Board of India (Sebi) in 2012. The disclosure and regulatory requirements for the platform were less stringent than those relating to listing on the main board. Since 2012, around 165 companies have listed on BSE SME and another 60 on NSE Emerge. Some of these companies have migrated to the main platform of the BSE and NSE.
With inputs from PTI