Small and Medium Enterprises (SMEs) are the backbone of a nation’s economy. Like any other major economy, India too enjoys its fair share of SMEs which constitute bulk of the industrial base, also contributing significantly to the exports and GDP.SME segment has been a key engine of growth, employment, wealth distribution, and effective mobilization of resources (both capital and skills) in India. SME Segment has been the largest generator of employment in the Indian economy. Today, Indian SMEs operate in sectors ranging from traditional to the most modern industries competing with the bests-of-the-world. SMEs in new economy sectors like IT, ITES (Information Technology Enabled Services), retailing, education, entertainment, media, and the like represent the new and modern face of India.
SMEs take a prominent role in social sectors as well and are known for bringing innovative business models. With the advent of the planned economy in 1951, a special role was earmarked for SMEs, which was given a fillip by the subsequent progressive industrial policies. The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 provided for facilitating the promotion, development, and enhancing the competitiveness of MSMEs (commonly referred to as SMEs) and for the related matters. A big leap for SMEs was witnessed in 2010, with “The Prime Minister’s Task Force” recommending setting up of dedicated stock exchange/ platform for SMEs. SEBI, through its circular dated May 18, 2010, laid down the framework for setting up a stock exchange/ trading platform dedicated to SMEs.
An SME Exchange is a platform of stock exchange dedicated for trading the shares/securities of SMEs who otherwise find it difficult to get listed on the Main Board. The concept originated from the difficulties faced by SMEs in gaining visibility and attracting sufficient trading volumes when listed along with other stocks on the Main Board of stock exchanges. World over, dedicated SME trading platforms or exchanges are prevalent, which are known by different names such as ‘Alternate Investment markets’ or ‘growth enterprises market’, ‘SME Board’ etc.
Some of the known markets for SMEs are AIM (Alternate Investment Market) in the UK, TSX Ventures in Canada, GEM (Growth Enterprise Market) in Hong Kong, MOTHERS (Market of the high- growth and emerging stocks) in Japan, Catalyst in Singapore, and Chinext in China. As a matter of fact, NASDAQ also started as an SME exchange.
In India, listing on SME Exchange is regulated by Chapter IX of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. “SME exchange means a trading platform of a recognized stock exchange having nationwide trading terminals permitted by SEBI to list the specified securities issued in accordance with Chapter IX and includes a stock exchange granted recognition for this purpose but does not include the Main Board (which is in turn defined as a recognized stock exchange having nationwide trading terminals, other than SME exchange)
To be listed on the SME Exchange, the post-issue paid-up capital of the company should not exceed INR 25 Crores. The companies listed on the SME exchange are allowed to migrate to the Main Board and vice-versa as and when they meet the listing requirements of the exchange and there shall be compulsory migration of companies listed on SME Platforms of the exchange, to the Main Board in case their post issue paid up capital exceeds INR 25 Crore.
BSE Limited, as an Exchange, is the first one to seize the initiative followed by NSE, both of them have come up with their SME Exchanges named BSE SME and NSE Emerge respectively, to leverage their respective trading platforms developed over the period.
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