SEBI to ease SME Listing Norms

With an aim to promote the ever-growing three year old segment, the Securities and Exchange Board of India (SEBI) will soon review the norms related to trading and listing of SMEs.

Expected changes

As per stock exchange officials, this step is taken after the market participants demanded a reduction in the trading lot size of  Rs.100,000 after being listed. SMEs feel that the current amount discourages a lot of genuine investors and thus should be revised. They have also asked SEBI to review the listing requirement of 25% minimum equity dilution as there is a huge gap between the valuation of niche companies of SMEs and their urgent funding requirements. Merchant bankers want it to be reduced to 10%.They suggest that when SMEs wish to shift to the main board, 25% public float should be applicable.

After being listed for more than 2 years, companies can shift to the main board. It has been over 2 years that the SME segment was launched. Hence, companies like SRG Housing Finance Ltd., Bronze Infratech Ltd., Anshu Clothing Ltd., etc. have given an application to get on the main board of BSE.

SEBI wants the issuers and investors to greatly benefit from SME segment. At an investor seminar held in mid-January, whole-time member of SEBI Rajeev Agarwal informed that the regulator wants many SMEs to feature in the list and be able to explore the capital market for funding.

SME platform

SEBI has been dedicatedly working to assistthe SMEs. It had announced simpler norms for listing for the SMEs in the past too. Later, in March 2012, both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) rolled out distinct SME platforms. At present, there are 83 SMEs listed on BSE’s SME platform and 6 on NSE’s platform.

Stock Exchange suggestions

The stock exchanges are of the opinion that the investors’ class should be widened. It should include wealthy individuals, corporate bodies, non-institutional investors and merchant bankers unlike the current rule that allows only institutional investors to invest in companies listed on the SME platforms. 

Some experts suggest that SEBI should also consider lower underwriting levels, which are appropriate safeguard for liquidity and investor protection. SMEs are allowed to choose from BSE and NSE and be listed in either of the two. They should be able to choose both. Besides, BSE suggested that the current market making period of three years should be extended to 5-10 years.