SME LISITING

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NEED FOR SME
Despite the benefits associated with the public listing, the SMEs were not able to access the capital markets through Stock Exchanges due to several factors such as stringent regulations, disclosure and financial requirements, and the like. The creation of a separate platform on stock exchange for SMEs has been on the policy makers’ agenda for quite some time, and finally, in March, 2012, SME Exchange was launched. A dedicated stock exchange platform for SMEs would allow them to access capital markets easily, quickly, and at lesser costs.

The need of a dedicated platform for SMEs on Exchange can be attributed to several factors including the following :

  • A dedicated platform for SMEs exchange will provide SMEs with equity financing opportunities to grow their business – from expansion to acquisitions.
  • Listing the company would facilitate the expansion of the investor’s base, which in turn helps the company get a secondary market for equity financing, including private placement.
  • With the availability of equity financing options, the debt burden can be set lower resulting in a healthier balance sheet and lowered financing cost
  • Company’s visibility will improve with the coverage from analysts and media that can add to the credence and image of the SME leading to benchmarking its fair value.
  • The listing would result in increased participation by venture capital players as they would have a ready, transparent, and tax-efficient exit route.
  • Listing would add value to the companies who wish to make use of ESOPs and other stock base compensation plans as a tool to reward and retain their employees. It is expected to encourage innovation and entrepreneurial spirit, much required from the perspective of the Indian national economy.
  • Capital Market allows the distribution of risk efficiently by transferring risk to those who are best able to bear it.
  • SME sector will grow better on two pillars of the Financial system, i.e., Banking for debt capital and Capital Market for equity capital.
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