Tradeindia Exim Newsletter, May 8, 2012

Exim Newsletter,May 8, 2012

CEO's Note

SME Conclave – awareness on SME stock exchange

The long wait is over. Now it seems only a matter of time before the equity market opens up a big new world of opportunity to the Indian small and medium enterprise sector. With the country's two leading stock exchanges launching their respective SME exchanges recently, now our small entrepreneurs can explore the world of equity financing; but before taking that first step, I think it would wise for the sector to get prepared, understand where it can take us, and how it will benefit.

In order to spread awareness about these issues, recently Tradeindia.com, in collaboration with ET Now, organized a discussion -- SME Conclave -- at the Bombay Stock Exchange. The event, which saw participation by eminent speakers from the SME space, featured elaborate discussion on how BSE's recently launched SME Exchange could help unlock value for the SME ecosystem, thus making it a successful experience for us to be part of the first ever such initiative in the country. I think such efforts are the call of the time at this crucial juncture. Currently being telecast on Saturday 5th/12th/19th May, at 5.30 PM on ET Now (repeats Sunday 6th/13th/20th May, at 6.00 PM) the main objective of the conclave is to educate and inform SMEs of this very important and useful new development for their future growth plans.

It is a well-known fact that debt and equity capitals both are essential for a business, but unfortunately till now, Indian SMEs have to rely primarily on – debt, particularly bank loans which, needless to say, most SMEs find significantly difficult to raise. Banks are usually hesitant to lend to them due to their higher risk profile owing to zero collateral or their limited years of operation. As a result, majority of SMEs prefer to approach alternative sources of capital, which are usually far more expensive and rarely a guaranteed source.

This needs to be countered, and I think setting up of the SME stock exchanges is a big step forward to address the sector's immediate need for finance. In some other parts of the world, several such platforms have already been operating -- one such example is Alternative Investment Market (AIM), operating as a part of the London Stock Exchange, and which since its launch in 1995, has attracted more than 3,000 small companies from across the globe to join it.

SME Exchange is a new thing for our SMEs, and I hope that they will take it as an opportunity to unlock the value of their business as well as team members. At the same time, preparedness is crucial. In the view of this, I think the telecast of the event -- SME Conclave, will answer many queries, which SMEs face in regard to SME stock exchange. The programme would help SMEs in getting some valuable insights into equity financing and how it would help unlock the value for the SME ecosystem in the country.

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