SMEStreet Podcast Interview: BSE-SME Journey So Far So Good

It was close to over 8 years ago when I first met, Mr. Ajay Thakur, Head of BSE-SME, at that time he explained and introduced the concept of BSE-SME. At that time, I still remember there were only 18 listings have happened. So, the work was just started. Today, with over 33o SME listings the road is still considered to be less travelled. 

Well, BSE India is the first stock exchange which invited and attracted the SME entrepreneur to get listed. And we all have witnessed that BSE -SME has also availed the earlier mover advantage in this. 

Well, over the years, SME Listing has become novel and well-versed trend among SMEs and Ajay Thakur is the person behind this success. 

In an exclusive conversation between Faiz Askari, Founder of SMEStreet and Mr. Ajay Thakur - Head-BSE-SME & Startups, BSE India, a new regime of fundraising among SMEs have been discussed and trends have been unleashed.

The interaction is also available as a SMEStreet Podcast on Spotify.

Here is an edited version of the interaction:    

Faiz Askari: How is the awareness level penetration of alternate ways of raising funds through Stock listing? What are your observations in dealing with SMEs in their roadmap of getting listed? 

Ajay Thakur: MSMEs are the backbone of any economy. This is true in the case of India also. They are the biggest employers in tier 2 and tier 3 cities. The concept of creating a platform exclusively for SMEs to raise fund by getting listed. IN 2010 work was started and  SEBI has introduced a framework of SME exchange.

BSE is a seasoned organization having worked in India for over 140 years in establishing equity culture. We applied to SEBI to get the permission of starting the SME listing platform. We started our journey in 2012 March, and now we have over 330 SME listed companies in our platform. Rs 3340 Crore have been raised and market capitalization of over 33 thousand crores across 22 industry different sectors.

"BSE-SME started journey in 2012 March, and now we have over 330 SME listed companies in our platform. Rs 3340 Crore have been raised and market capitalization of over 33 thousand crores across 22 industry different sectors."

FA: How is the lockdown and COVID affected period?

AT: We have over 10 listings only in last two months. We are expecting a very strong undercurrent for getting listed and even in the COVID era this will going to attract more SMEs. 

FA: SME Listings norms have also been eased out recently. Please explain to them a bit and give your outlook on the impact of new norms.

AT: We are inviting more and more SMEs to join the formal sector. As a matter of fact, one less than 2 percent of MSMEs are part of the formal sector. We have relaxed our guidelines, which will ensure more number of MSMEs/SMEs to join SME Listing benefits. Precisely speaking in our relaxed norms, any SME which have generated operating profit in any single year out of the last three years of business operation can get listed and has a total of 1.5 crore of net tangible assets can apply for the SME listing. Earlier these guidelines are considered as SME friendly. 

FA: Please highlight the key benefits of getting listed in BSE -SME. 

AT: There are several benefits that SMEs can expect by getting listed into the stock market. To be precise, here are few important benefits for SMEs in getting listed in BSE SME / BSE Startup: 

1. Fundraising by equity dilution for Capex requirement or working capital requirement etc.
2. By equity infusion in the company, the listed SME can become strong, it would help the SME to raise the debt at lower cost and get the benefits of growth.
3. The credibility of the promoters increases many folds because the transparency comes into the company and also compliances are being done.
4. Increases the visibility of the company, as it is traded on the exchange. The company gets exposure in domestic as well as in the international market.
5. Equity can be considered as currency as it trades on the exchange. The promoters can go for further fundraising till the company is listed in BSE
6. Equity becomes collateral in the hands of promoters, maybe after 3 to 4 years in case the promoter does not want to dilute, he can still use it as collateral and raise debt funds.
7. The promoter can also reward his best employees with ESOP option. 
8. It also help in unlocking the value of the company, as it is listed and traded on the Exchange.

"Equity can be considered as currency as it trades on the exchange. The promoters can go for further fundraising till the company is listed in BSE"

FA: According to you, change in the definition of MSME will help companies to fundraise through BSE SME?

AT: Yes, it going to help due to the investment in plant and machinery has been increased to Rs 20 Crores. As per new definition, it has been kept the same for the services sector. This will help in bringing more companies under the net of MSMEs which will help many MSME to connect with banks or capital market for fundraising.  I am sure that the fundraising exercise will be promoted in this new MSME definition as entrepreneurs will be motivated to get listed.