Brand & Beyond Blog - Think Tank

In 3 months, 21 MSMEs may list on BSE's SME platform

In 3 months, 21 MSMEs may list on BSE's SME platform

In the next three months, 21 companies from the micro, small and medium enterprises (MSME) sector are poised to be listed on the BSE's small and medium enterprises (SME) platform.

Of this, West Bengal's MSMEs would account for nearly half the listings on the exchange.

Ajay Thakur, head of the BSE SME platform, said that such companies from certain states like Bengal have traditionally relied on bank loans, borrowings from individual lenders and own capital to fund growth or meet their working capital needs.

"This is changing now. Out of the 259 companies which are listed on the SME platform, 18 are from this state. Interestingly, two of the largest IPOs on the platform came from firms in West Bengal. They are now realising that the IPO route is a better option than private borrowings or funding from banks," Thakur said.

The forthcoming consolidated IPO size of these 10 firms from Bengal is expected to be between Rs 1.5 billion and Rs 2 billion.

In the recent past, the BSE conducted numerous seminars on the benefits of listing and also roped in merchant bankers who directly interacted with the SMEs to make them understand how they stand to gain once listed.

The National Stock Exchange (NSE) has also conducted eight such programmes in the past 12 months in association with various industry bodies like the Federation of Small & Medium Industries, Indian Plastics Federation, CII and others.

"Traditionally, states like Gujarat, Maharashtra and others had the equity culture while others like Bengal had been a debt-driven economy," Tojo Banerjee, regional head (east) at NSE, said.

"The benefits of listing range from raising funds to maintaining proper debt-equity ratio to improve balance sheet, among others," Thakur said.

Listing also helps such small companies gain investor confidence faster owing to more transparent filing norms governed by various statutory authorities and market regulators. Also, such companies can retain talent better by offering employee stock ownership plan.

Kolkata-based Kritika Wires, which is likely to get listed on the NSE Emerge platform next month with an IPO size of Rs 170 million, wants to first reduce its Rs 400 million debt by over 60 per cent and then fund factory expansion.

Anant Kumar Sharma, chief financial officer of this company, said, "Reducing the interest cost is key to generating more cash flow, which will also improve the debt position of the company. We have been thinking of floating an IPO for quite some time but narrowed down on it in December 2017 and filed for listing in May this year."

Shahsi Agarwal, senior vice-president of corporate strategy and investor relations at Kolkata-based Dollar Industries, feels that listings on the BSE and NSE have given the company more visibility, which has been an advantage. Dollar Industries got listed on the NSE on April 2017 and on the BSE in June 2018.

"Our market cap is now Rs 19 billion," Agarwal said.

Meanwhile, difference in the number of listings on the NSE and BSE are mainly on account of stringent listing conditions on the NSE.