The Role of NSE Emerge and BSE SME in Empowering Small Enterprises

NSE EMERGE & BSE SME: SME EXCHANGES AND THEIR IMPACT ON SMALL BUSINESSES

What are NSE Emerge and BSE SME?
NSE Emerge and BSE SME are specialized platforms established by the National Stock Exchange and the Bombay Stock Exchange, respectively. These platforms cater to small and medium enterprises (SMEs) in India, enabling them to list their shares without the conventional Initial Public Offering (IPO). This mechanism allows SMEs to gain easier access to capital markets, facilitating connections with a wider investor base.

Why are more SMEs choosing to list on these platforms?

SMEs are increasingly opting for these platforms due to their simpler listing requirements, lower costs, and access to a broader pool of investors compared to mainstream exchanges. These advantages render it feasible for SMEs to acquire capital for expansion, enhance their visibility, and bolster credibility without undergoing the stringent processes associated with listing on major stock exchanges.

What has been the recent trend in SME listings on these platforms?

There has been a significant rise in SME listings recently. For instance, in August alone, 50 SMEs submitted applications to list, with an additional 55-70 expected to follow within the month, aiming to raise approximately ₹500 crore. Over the last eight months, around 165 SMEs have successfully raised close to ₹5,894 crore through these platforms.

What concerns have regulators like SEBI raised regarding SME listings?

The Securities and Exchange Board of India (SEBI) has expressed concerns about the overwhelming subscription rates for SMEs that may have insufficient financial histories or business track records. This phenomenon is partly fueled by investors' fear of missing out, which could lead to significant risks. SEBI is contemplating modifications to the listing norms to enhance investor protection and ensure a more stable investment environment.

What are the risks and benefits of investing in SMEs on these platforms?

• Benefits: Investors often enjoy high returns from SMEs that perform well after listing. Moreover, investing in these platforms contributes to the growth of crucial sectors of the economy.
• Risks: Investments in SMEs come with higher risks due to potential volatility, reduced liquidity, and occasionally less transparency compared to larger, established firms.

How does the recent performance of the BSE SME IPO index reflect market sentiment?

The BSE SME IPO index's remarkable 90% surge over the past eight months signifies robust market sentiment and strong investor confidence in the growth potential of SMEs listed on these platforms.

What future changes are anticipated in the regulatory framework for SME listings?

SEBI plans to issue a consultation paper proposing revisions to the regulatory norms affecting stock exchanges and merchant bankers associated with SME listings. These proposed changes aim to protect investor interests while promoting the healthy growth of SMEs within the capital market.