Top stock exchange NSE today launched operations of its new trading platform for SMEs,Emerge,with the first listing in this segment and said some more companies would follow.
The platform was launched by Finance Minister P Chidambaram,along with Sebi Chairman U K Sinha,with the listing of Thejo Engineering — the first company to get
listed in NSE’s Emerge segment.
After the launch,NSE Managing Director Ravi Narain said that the exchange has been very careful in bringing in only good-quality companies on the platform and there was “quite a decent number of companies” interested in getting listed.
He,however,did not divulge the exact number of the companies that NSE expects on the Emerge platform.
“NSE would provide all the required hand-holding to the companies interested in getting listed on Emerge,” NSE’s Joint Managing Director Chitra Ramkrishna said.
Narain said the turnover was expected to remain modest on the platform initially and it was not driven by a revenue- earning model.
However,the platform would help in developing the eco- system and provide the small and medium enterprises (SMEs) a much-needed avenue to raise capital from the equity market.
“At times,it is difficult for these small companies to get credit,but here we are talking about helping them get the equity risk capital,” he said.
Narain,however,said that the Emerge platform was very different from London Stock Exchange’s AIM platform,as there have been no relaxations in regulatory framework for such segments in India.
Asked about the competition from BSE,whose SME platform has already got seven listed companies,Narain said that the NSE would bring in innovation to its model.
“Beyond the capital market Sebi’s requirements,we have added two more things — voluntary rating and voluntary due diligence — for the companies desiring to get listed on Emerge,” he said.
Ramkrishna said,meanwhile,that the exchange would also put out research reports about the Emerge-listed companies on its website for the benefit of the investors.
The platform would seek to safeguard the interest of the companies,investors as well as market intermediaries,she said.
Companies would get the option for trading in continuous market,or through call-auction mechanism.
“Ensuring success of the SME platforms is one of our top priorities. We have worked out regulations for the SME platform,keeping in mind that this is a market only for
informed investors,” the Sebi Chairman said.
“Therefore,a higher investment threshold has been kept,so that only investors who have the understanding and the financial strength to invest,come in to the SME platform,” he added.
Narain said NSE is keen to develop a sustainable platform for India’s best emerging businesses to raise capital from informed investors.
Based on investor feedback,NSE has put in place a strong and credible admission process for listing on Emerge and these processes include third-party diligence and hand-holding of SME entrepreneurs.
NSE said it has also developed an electronic market place,India Venture Board,for increasing primary and secondary flow of venture capital and private equity investments in India,by connecting various stakeholders.
Ramkrishna said,”We have tried to differentiate our offering for SMEs,who want to raise capital by focusing on reducing costs for the emerging companies,both in the run up to their listing and in the post listing phase.
“This will give more confidence to investors to invest in the companies,which have good growth potential and high standards of corporate governance.”
NSE said it would also create awareness about the role of “nominated investors” on the SME platform. These investors provide support to merchant bankers for their underwriting and market making obligations. The nominated investor could be a QIB (Qualified Institutional Buyer) or a VC or PE fund.
In the case of Thejo engineering,SIDBI Venture Capital Ltd has played the role of a nominated investor to back IDBI capital,the merchant banker for the issue.
Thejo engineering,a profitable Chennai-based company,saw its IPO over-subscribed by 1.53 times earlier this month,while retail category was over-subscribed by 2.61 times. The total number of shares offered was 4.72 lakh shares and bids were received for 7.23 lakh shares.