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India’s SME IPOs: From a quiet start to bull run

India’s SME IPOs: From a quiet start to bull run


India can soon transform into a $10 trillion economy if its skills and entrepreneurship are channelised in the right direction, Ajay Thakur, former Head, BSE SME & Startup said, adding that SMEs are the engines of growth.

In an exclusive interaction with ET Digital in Mumbai, Thakur recalled how convincing SME promoters to get listed on the BSE SME platform was an arduous task during his stint. Thakur played a key role in setting up of SME Exchange and Startup Platform in the country in 2012 and 2018, respectively. “At that point in time, no one was convinced that the SME platform would take off. All feedback was negative. I knew from day one that it would be a very challenging assignment. It took me 1.5 years to launch the SME platform. But I knew it was an entrepreneurial journey and slowly things fell into place,” he said.

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In the past 10-12 years, Thakur met almost 40,000 SME promoters and spoke in nearly 1500 seminars. He started travelling to Tier II cities as well at this time. “I had many sleepless nights. In India, financial literacy is very low. SMEs are always worried about compliances. Though it was challenging, it slowly turned into an interesting assignment for me,” he stated.

Thakur admits that initially he was not bullish about how things would shape up. But as results started showing, the sentiments changed for him. “When I got 50 SMEs listed, I became more positive. Positivity comes when you reach different milestones,” he says, confessing that they were “hard nuts to crack.”

The fear factor, he added, got a lot of apprehension among them to get listed. “They thought listing would bring in a lot of compliances and notice from regulatory agencies.”From 2012, Thakur saw 505 SMEs getting listed on BSE and 495 on the NSE platform. Thakur says that the advantages for SMEs are clear enough. “I have met so many SMEs, they were over-leveraged. They were dependent on only one sort of financing–debt financing. This led to them paying a lot of EMIs every month due to which they were bleeding. They were looking for funds by which cash flows could turn positive. This would help to make their balance sheet healthy and without any burden on the mind–this could also reduce their debt,” he said.Such aspects would have other follow-on effects too. The healthy balance sheet would make the stock market valuation increase as well as lead to greater transparency. “When all this is in place, there is a better trust factor on the credibility of the promoter. Investors like to come and participate in the company,” he said.

Talking about how the rise of SME IPOs in recent times is a good sign, Thakur said that a lot of such companies are seeing huge subscriptions. “SMEs are now finally coming forward and getting listed. How is value discovered in the market? It is when demand exceeds supply and this is what is happening on the SME platform. That is where we see returns happening, then liquidity flowing more towards that side,” he added.

He, however, emphasised that an SME must soon look at transforming from small to medium and then a large enterprise. “It is not good for an SME to say that I want to remain an SME. Hence, we started the migration policy which said that after a certain time, one should be able to migrate to the main board of the stock exchange.”

Thakur expects another 200-250 SMEs to get listed in the course of one year. He attributed this to growing awareness and more promoters coming forward. He also advised SMEs to be mindful of transparency, compliance and full disclosure when thinking of getting listed. “If this is not done, investors will not look favourably at the company. They will also invite the wrath of regulatory agencies,” he stated.

Delving on how a lot of transformation was seen in SMEs post listing during his tenure, Thakur stated that the vision of promoters had undergone a sea change over time. “It was more myopic earlier, which later changed to a corporate approach. They tasted the success of listing and saw how people treated them. Even children who left them had started returning and joining them. The second generation came into the business. Everything around them started changing,” he said, the enthusiasm palpable in his voice.



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