World Trade Center Mumbai in association with All India Association of Industries (AIAI) organised a session on ‘How to raise Equity through an SME IPO’ with resource person Mr. Sumeet Mehta, CEO, Paradigm Advisors.

During the session, Mr. Mehta advised SMEs to grow their net worth, improve debt-equity ratio, strengthen their balance sheet and enhance their credit rating by raising equity capital on the dedicated SME platforms of Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). “So far, 464 SMEs have raised INR 5,727 crore equity capital on the BSE platform, while their overall market capitalization has grown to INR 97,488 crore. Similarly, around 234 SMEs have raised INR 3,100 crore on the NSE platform and their market capitalization has exceeded INR 8,000 crore because of strong investor interest in SMEs with promising business prospects. SMEs generating profits at least in the last two years can go for IPO to dilute the shares of promoters, reduce debt, invest in new projects or build a war chest for mergers and acquisition,” Mr. Mehta said.

Speaking about the benefits of listing shares on stock exchange, Mr. Mehta mentioned, “By listing their shares on stock exchanges, SMEs can improve their credit rating, corporate governance, financial discipline, branding and market perception. This reduces their risk perception and thus helps them raise debt at reasonable interest cost. IPO also prepares the ground for future capital raising to grow the business through follow-on public offer (FPOs).

He also highlighted the essential procedures to be followed before and after listing the shares on stock exchange. “SMEs need to streamline their financial statements, balance sheets, receivables and key financial ratios to attract investors. They should also maintain consistency of numbers across different financial statements, engage a professional team to manage business operations, create a professional Board of Directors and decide on whether to include all its business segments under the listed entity at the IPO stage or keep some of them separate for inclusion at a future date. They should also decide on the appropriate valuation in consultation with merchant bankers, investment analysts and peer-review of competitors.” Mentioned Mr. Mehta.

Earlier in his welcome remarks, Dr. Vijay Kalantri, Chairman, World Trade Center Mumbai pointed out, “SMEs are the key drivers of economic growth, and they will play a major role in attaining the USD 30 trillion economy by 2030. But our SMEs face funding gap of up to INR 25 lakh crores, as per UK Sinha Committee Report of the RBI. SMEs face challenge in raising collateral-free bank credit even though their contribution to the non-performing assets (NPAs) of banks is low. SMEs can raise equity capital to meet their funding requirement as this is the boom time for IPOs. We need simpler compliance norms for SMEs to list their shares on the stock exchanges.”

Ms. Rupa Naik, Executive Director, World Trade Center Mumbai, remarked, “exports and entrepreneurship are key drivers of economic growth. In recent years, we have seen growth in the share of women owned enterprises in the MSME sector from 15% (under the erst-while UAM portal) to 30% (under the new Udyami registration portal). There are around 600 central and state governments schemes, including schemes of NABARD and SIDBI to promote entrepreneurship, especially for women entrepreneurs. We need to create awareness about the plethora of schemes to support small scale entrepreneurs. NSE and BSE have dedicated platforms for SMEs to raise equity capital and the objective of this session is to create awareness about these platforms for the benefit of small-scale enterprises.”

The session was attended by entrepreneurs and professionals from banks, investment analysts and consultants.

In Photo (From left to right): Ms. Rupa Naik, Executive Director, WTC Mumbai; Dr. Vijay Kalantri, Chairman, WTC Mumbai; Mr. Sumeet Mehta, CEO, Paradigm Advisors; Ms. Smita Deshmukh, Head – Center of Excellence, WTC Mumbai.