“Manufacturing sector drives momentum; Maharashtra & Gujarat big traffic drivers”
Blockbusters are not the sole preserve of Bollywood. Mumbai is home to another creative blockbuster in the making. Most importantly this blockbuster is taking shape on the might of the small scrip. Small and medium stocks’ big turnaround at the BSE SME Exchange is the stuff blockbusters are truly made of. Now the BSE SME Exchange leadership is busy scripting a double ton (achieving listing by 200 SMEs) by June end. Meet Ajay Thakur (Head – BSE SME), the man behind the bull-run at the BSE SME Exchange. In his most exhaustive and definitive interview, Thakur unveils his exchange’s vision to mitigate the capital constraints for the SME sector. Excerpts from an hour long sit down with Swastika Tripathi of SMEpost.com.
On learning from 2016
Q: 2016 witnessed a dream-run for SMEs at BSE. How did it happen?
A: 2016 has been the best so far, and there is a possibility that 2017 will be even better. The year gone by showed highest listing mainly due to two reasons – awareness and regional diversification
BSE SME did a lot of awareness programmes throughout the year to popularize the importance of listing among SMEs. At the same time, SMEs from almost every state showed interest this time. There was a hesitation among SMEs but the benefits availed by others have encouraged them to come forward and get listed.
The numbers of merchant bankers, i.e. the intermediaries who connect SMEs to the platform, have also increased. The fear of risk factor within them has also gown down.
All these factors have created an ecosystem which has resulted in the year-on-year increase in number of SMEs getting listed on the platform today. And we are bullish that this number will keep increasing in the future.
Q: High growth trends are hard to endure. What is the 2017 plan of action?
A: We plan to boost our work-force. We are also focusing on promoting listing in various regions of country, especially southern India because we haven’t attracted the expected number of listings from there.
We strategize to share the experiences of our existing promoters with others. This will build a level of comfort within new promoters which will encourage them to get their companies listed on the platform.
Our strategy is very comprehensive. With maximum man-force and a large network of promoters, we will encourage SME IPO listings throughout 2017.
Q: How do you leverage the learning from 2016?
A: A trend of subscription has gradually built-up on BSE SME platform. Till 2015, companies were subscribed not more than 1.5 times, or maximum two times in rare cases. But 2016 has shown a tremendous increase in subscriptions. Listing leads to uplift in the business, profits, valuation and investor confidence
The biggest reason was that there was a trend of growth in business, profit-making and increment in valuation of SMEs after getting listed. This gave investors a sense of confidence in SMEs. This way we saw an increase in the subscriptions of SMEs. 5x, 10x, 15x, and even 20x times companies got subscribed on an average in 2016.
Super Fine Knitwears recently got 24 times subscriptions. A few days ago, RMC Switchgears got almost 20 times subscribed. These are the kind of subscriptions coming up on SME platform.
We can clearly see a growing comfort level towards SMEs among investors, and a lot of them are researching about SMEs today whenever they submit their prospectus.
Business opinion has changed, and with this the profitability of companies has increased. This has lead to employment generation, too. BSE SME platform has today thus become a way of employment generation. Various Tier-2 merchant bankers, who were jobless, are now active. This is a huge contribution on BSE SME’s part.
On Sector & State Profile
Q: What is the sector profile of SMEs listed during the year? Does it have a particular sector bias, or is it all encompassing?
A: Companies are coming in from sectors like manufacturing, service, advisory service, hospitality, IT, agriculture, etc. There is no sector specific bullishness. Yes, manufacturing sector has maximum number of companies coming in, but other sectors are no less.
Almost 24 sectors have contributed till now of which manufacturing had highest. Gradually all the sectors are participating and the interest is increasing in a diversified way.
Q: Is this diversification there in state-wise listing, too? If no, how does one explain the laggards?
A: Maharashtra and Gujarat have contributed the highest listing till now. But other states are also showing interest lately.
Promoters need to come forward and get their companies listed. At some level, we still find that there lays an assumption among SMEs that listing results in an increase in compliances. We are trying to reach out to such SMEs and shape their visions correctly by enlisting benefits before them. For example, earlier companies weren’t coming in from Punjab, but today we have received pitches from three companies as a result of awareness campaigns. We are similarly focusing on other states too.
On Importance of IPO
Q: What difference has IPO listing brought to small companies? Please share your insights for year 2016 in particular.
A: Within six months of listing, a company needs to file its balance sheet. So first and foremost, the promoter shows transparency in the company. Secondly, companies start focusing towards profitability, because this increases their value in market. SMEs start shaping up a profit generating business model. SMEs start exploring new areas and opportunities. This transforms the entire look and structure of the enterprise.
The functional delegation too shapes up. Companies start investing in CFOs and HRs, who then take up their work load. This way the promoter gets time to solely focus on the business and then they start strategizing the business in a way that it becomes more of a profit oriented business.
Q: Are there any incentives offered by BSE SME to encourage IPO listings?
A: We have already minimal fee structure for an SME to list on the platform. We take either Rs 25,000/- listing fee in a year or 0.01 per cent of market capitalization, whichever is higher.
We also take up a proper hand-holding of businesses. We guide them through regulatory functions. Our staffs resolve the issues of promoters.
As regulators, we are not allotted to incentivize, but by the way of guidance we help them.
On Capital Deficit & Role of Media
Q: Despite an increase in fund raising this year, there’s still a major section of SMEs left fund-less. Why?
A: I feel the contrary. Banking finance has reached out to SMEs on a rate of 12 to 12.5 per cent year-on-year. If a company’s business proposal is presented properly in front of a bank, they will definitely receive fund.
Also, government today offers various initiatives for SMEs. MUDRA Bank and SIDBI have disbursed various funds. I believe coming years will be very fruitful for MSMEs to access fund and grow business.
Business promoters, too, should keep in mind to build logical and profitable business models. A loss making business model can never raise finance.
BSE SME platform is here for SMEs to access equity funds. All these channels put together, are here to provide finance to SMEs, promote their ideas and make way for employment to achieve the ambition of ‘Make in India’. There are a lot of avenues and hence MSMEs will have no issues of finance in future.
Q: What role do you see media platforms play in encouraging the IPO ecosystem for all SMEs in the country?
A: Awareness cannot be generated without the help of media platforms. We want to leverage platforms like SMEpost to the maximum, so that BSE SME platform can reach out to entrepreneurs across nation.