The Securities and Exchange Board of India (SEBI) is set to release a consultation paper aimed at refining the listing process for Small and Medium Enterprises (SMEs), according to SEBI’s Whole Time Member Ashwani Bhatia. This paper will address regulatory issues involving exchanges, merchant bankers, and other stakeholders in the SME listing process.
During an off-camera discussion, Ashwani Bhatia highlighted the critical role SMEs play in India’s economy, contributing 62% to employment and 30% to GDP. He emphasized that the SME platform provides alternative funding opportunities for these enterprises.
Since its inception in 2012, the SME platform has witnessed a significant rise in Initial Public Offerings (IPOs) and investor participation. In the past five years, the number of IPO listings on the SME platform has quadrupled, and the funds raised through these IPOs have increased twelvefold. Many companies listed on the SME platform have shown remarkable performance, leading them to graduate to the main board.
Bhatia revealed that so far, 600 companies have been listed on the SME platforms of BSE and NSE. Interestingly, around 200,000 companies appear to be ready for listing in the near future.
However, Bhatia also pointed out existing challenges in the IPO and listing processes for SMEs. One major issue is the lack of thorough scrutiny by chartered accountants, merchant bankers, and exchanges, which can lead to inflated valuations that might be detrimental in the long run.
He advised intermediaries, including chartered accountants and merchant bankers, to avoid shortcuts and ensure proper due diligence during the listing process.
SEBI’s heightened vigilance follows the recent IPO of Resourceful Automobiles, which garnered an overwhelming subscription. The company had applied to raise ₹12 crore, but the subscription received was ₹5,022 crore—approximately 418 times more than expected. Such high subscriptions can lead to a strong listing and sharp price increases in shares, which may not always align with the company’s fundamentals.
This upcoming consultation paper from SEBI aims to address these challenges and make the SME listing process more robust and transparent, ensuring sustainable growth and investor confidence in the SME sector.
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