SME IPOs. Let the Bacchhus Play

SMEs in India are no different their counterparts anywhere else in the world. Their roles in equitable distribution of wealth, generation of wealth, innovation, etc. are the same. And so are their challenges, financial being the main one. The hunger for growth makes hungry for more money all the time. They find it difficult. There are others too. Like availability of labor, limited reach, marketing finesse, technology, etc. remain the challenges everywhere. Infact, the smaller the economy, the greater are the challenges.

The. government in the promotion of SMEs are doing a fair job. It is one of the financial regulators which seem to be having issues

SEBI is concerned far all valid reasons. Sure, there are issues. The finance ministry knew all the problems before it sanctioned the two dedicated stock exchanges a decade back. The trouble is not with idea, but its implementation. Idea is good, but giving it to hands of market players proved dangerous. Some investment banks (IBs), and some fly-by--night

Operators, have spoilt the process. You cannot run an IPO unless you have the expertise, and an IPO is not the hen that lays golden eggs! As an IB you need to have a marketing plan

that needs to be holistic and precise. It is a fact that there are IBs who do not have a plan besides telling the Issuer to keep the one-time subscription money handy and then sell it to the operator at a discount! In this year we have had an IPOs oversubscribing 1000 times, 600, 500, 400, 300 200, 100, etc. times, the game is to lure the individual investor part his hard-earned money towards investing in it.

SEBI needs to do something about that instead of casting aspersions on the very idea of SME IPOs. One of the suggestions that can be made to SEBI is to further bifurcate the exchanges with Rs. 25 crores as IPO size as the point of bifurcation. Another suggestion is to have an one-time subscription deposited to the regulators and it pays the company as and when the money is required. This way a trail of money is established and the operator is eliminated. The finer nuances can be handled by SEBI. 

In India, there are 633.9 lakh MSMEs. Of which, let us just say that there are barely 3 lakh SMEs. Considering that barely 1000 companies have been successful in raising money through stock exchanges in nearly 11 years, we have a long way to go. Also considering that the single most important pain-point for a SME is availability of monetary resources, it is the access to stock exchange which is important in this regard. 

SEBI needs to consider this before doing anything. It is pointless to overhaul the system when you are aware that only a handful need to be reigned into the system. There is enough money and enough good SMEs for the investor to take note of.