Testing the waters with SME listings

The small and medium enterprises (SMEs) sector contributes significantly to India’s economy. In value terms, this sector accounts for about 45% of the manufacturing output and 40% of the total exports of the country. In addition, about 59 million people are employed in over 26 million SME units across the country.

The Securities and Exchange Board of India (SEBI) has excogitated the international experience where separate exchanges or trading platforms list securities of SMEs to provide ease of entry and less onerous disclosure requirements. These include the Alternative Investment Market in London, the Growth Enterprises Market in Hong Kong and the Market of the High-growth and Emerging Stocks in Tokyo.

Enabling an SME listing

Recognizing the growing need for finance for SMEs and to enable them to access capital markets with ease and at lower costs, on 13 April 2010 SEBI added chapter XA (to be read as chapter XB following a 23 September notification) to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations).

Madhur Kohli is a senior associate at Khaitan & Co. Khaitan & Co is a full-service law firm with offices in Bangalore, Kolkata, Mumbai and New Delhi.