SMEs on delisting mode, to tap PE

Font Size

Print

Feedback

Email

Discuss

New Delhi, May 11: Several small and medium enterprises (SMEs) like Kanohar Electricals and Nehru Place Hotels with turnovers of Rs 100-200 crore have already initiated the process to exit the bourses, though the Securities and Exchange Board of India (Sebi) is yet to come up with a guideline, facilitating the delisting process for corporates. It is learnt that a host of these companies are keen to tap the private equity funds to raise funds.

The smaller companies find it difficult to adhere to the Sebi guidelines which comprised stringent disclosure norms and Clause 49. That apart, these companies have to pay a substantial fees to the exchange.

“Tapping the PE firms is a more cost effective option for the SMEs than trying to raise funds through the bourses,” Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME) said, adding that that the shares of the smaller companies are not traded thereby defeating the purpose for listing.

Former Sebi chairman M Damodaran, in January, had told FE that guidelines facilitating the delisting process for companies with turnover of about Rs 100 crore was ready. However, it has not been issued yet. He had said that instead of the reverse book building process, a price that the promoter is willing to pay which may not essentially be not the floor price would be fixed to facilitate the exit option. Prithvi Haldea, managing director, Prime Database told FE that the main issue which needs to be sorted out is fixing the right exit price. “Compulsory delisting should not be due to non compliance but it should be followed when a company fails to add economic value through the exchanges,” Haldea added.