Small and medium enterprises (SMEs) may get a new breath of life with both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) vying for these companies.

BSE is believed to have sought regulatory approval to make its Indonext platform attractive for SMEs. It has joined hands with the State Bank of India (SBI) in its latest initiative.

According to sources, BSE had already submitted its proposal to the Securities and Exchange Board of India (Sebi) and is ready to dole out lucrative incentives like lower listing fees, reduced exchange charges and dilution in listing guidelines, if allowed by the regulator.

There are a little over 500 companies trading on the Indonext platform. Indonext was launched in January 2005.

BSE Indonext was the result of finance minister P Chidambaram’s proposal in his budget speech (on July 8, 2004) where he signalled the government’s interest in launching a trading platform that would enable SMEs to raise capital.

However, Indonext failed to attract many companies and thus its share of turnover is a negligible 3-4% of the daily BSE volume.

"When financial institutions along with NSE are vying with each other to provide an SME platform, it is logical for BSE to do the same. There is a feeling in the industry that BSE has an advantage on account of Indonext. The technology along with trading, clearing and settlement mechanisms are already in place. The tie-up with SBI will give a fillip due to its mammoth size and reach," he added.

Sources maintain that pending SEBI approval, the exchange is ready to earmark a portion of the transfer guarantee fund (TGF) and the investor protection fund (IPF) for the SME platform.

It is also believed that BSE might form an independent governing, listing and surveillance board for the SME platform. There is talk that the listing fee could be reduced or made zero for the first 3-4 years.

Listing guidelines may be relaxed to some extent. For instance, numbers could be filed at a six-month interval rather than the current quarterly system.

Experts say that the system will be akin to that of the London Stock Exchange’s (LSE) Alternative Investment Market (AIM) that caters to small and growing companies.

AIM offers the advantage of cost-effective trading and a regulatory environment, specially designed for SMEs. The issue of SME exchange has once again gathered fire with Sidbi, NSE, IDBI and IL&FS all submitting their proposals to Sebi to form such an exchange.

Mr. Divya Aggarwal

Money Management Consultants Ltd

Senior Copy Editor, Money Management Consultants Ltd
New Delhi, India

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