Indian exchanges given SME platform go-ahead

The Bombay Stock Exchange and National Stock Exchange of India have both secured provisional approval from India’s markets regulator to establish separate platforms for small and medium sized companies as the two go head-to-head for market share.

The new SME platforms will allow Indian companies to list at a lower cost and raise a smaller amount of money than on the main boards. The new platforms aim to increase visibility among investors and venture capitalists as well as providing liquidity for shareholders and encouraging entrepreneurship in India.

Madhu Kannan, chief executive of the BSE, said the SME platform would tie in well with the government’s agenda of opening up India’s markets to more of the population. He said it would also provide “promising enterprises of the future to access retail capital”.

Mr Kannan, a former banker who has worked for the New York Stock Exchange and Merrill Lynch, was appointed as head of the BSE two years ago with an agenda to drive through reforms at the 136-year old exchange, which had been steadily losing market share to its younger rival, the NSE.

Ravi Narain, chief executive of the NSE, said SMEs played a critical role in the Indian economy: “We are committed to providing a world class platform to deserving SMEs to give them the opportunity to list. This will give them access to the capital markets in an efficient manner and help them to raise capital to meet their growth opportunities.”

The Securities and Exchange Board of India, the market regulator, set out guidelines for an SME exchange last year, relaxing rules in an effort to make it easier for SMEs to list. Companies listing on the new trading platforms, for example, would only have to report half-yearly and not quarterly.

The BSE said it expected to secure final approval from Sebi in the next few months after it had addressed a number of technical, regulatory and arbitration issues. The NSE said it was making good progress to “operationalise” the platform.

The new trading platform will follow a hybrid model that copies elements from other exchanges such as London’s junior Aim market or Nasdaq OMX.

The Multi Commodity Exchange of India, controlled by Indian markets entrepreneur Jignesh Shah’s Financial Technologies, has also signalled interest in launching its own SME platform.

With only 2 per cent of India’s 1.2bn population involved in market trading, commentators point to the huge growth potential in India.

Research by the International Monetary Fund and Standard Chartered suggests that India could move from being the world’s tenth largest economy, with a GDP of $1,700bn, to the world’s third largest economy by 2030.

The Organisation for Economic Co-operation and Development said on Wednesday that it expected India’s economy to grow about 8.5 per cent this year.