Editorials

by Rajen Kumar

No Escaping Social Media

Running a magazine concentrating on issues of small and medium enterprises and managing with limited resources is a like living life on the edge. In this rush of meeting deadlines,...

Special Reports

Apr 2012

EMRC, Brussels Associates with SME WORLD as its New Media Partner

EMRC has promoted business partnerships with the developing world and has organised dozens of business forums in key decision-making cities, such as Amsterdam, Rome,...

SME Exchange

Distinct Benefits

Ashwin Merchant
Sep 2011

SME Exchange has distinct benefit in terms of listing and other fees which would be about half of what the main board charges. SME Exchange will help SMEs towards wealth creation by the SMEs, through inclusive economic growth, unleashing valuations and, also, creating wealth for all stakeholders, besides considerable income tax benefits and the facility to exit at any point of time. SMEs with paid-up capital up to Rs 10 crore can come on the SME Exchange. The listing norms have been simplified.

Mind:

IPO is a dream for any SME, given the reputation attached with being a listed company. It is also an important source of funds for expansion projects. Key ingredient to a successful SME IPO is a strong business model. The company should strive to become one of the key players in the segment in which it is operating in terms of size, relative profitability, sustainable competitive advantage, etc. Once SME promoters and management make up their mind for SME IPO, the time starts now, the process begins, the speed depends on the what SME company has achieved so far in terms of market / business development, customer acquisition, quality control, technology empowerment and marketing.

Market:

The risk is to plan to raise funds through the IPO channel. Running an IPO is an expensive process. As the company is widely discussed during the IPO process, its market reputation is also at stake. A major risk therefore is of poor market response. The company's image also takes a hit if the market reaction is unfavorable. Unlike other IPOs, in case of SME IPO the responsibility is on merchant bankers to fully underwrite the issue and hand holding SME for 3 yrs period besides co-operative business arrangement with market makers. If the IPO has lower participation, post-issue trading volumes may be low denying the company of many benefits which it seeks from an IPO.

The first step:

SMEs must approach a professional who offers SME IPO specific (a) Brain storming session with SME promoters and management towards IPO and other options of raising finance, Dos & Don'ts (b) Incubator & Mentoring services for SMEs towards IPO incl. interfacing finance and marketing (c) Branding SMEs for IPO (d) Strategizing 360 degree, 7 business functions - internal and external marketing and management (e) Preparing for professional outlook (f) Systems to make organized approach to everything in day to day business viz. (a)-(f) : Value Creation and Visibility Marketing for SMEs. Obviously, compliance are looked after by company appointed CA. This is an important phase ranging from few months to couple of years to get the best out of IPO and PE.

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