An Indian version of London Stock Exchange?s Alternative Investment Market (AIM)?dedicated to small and medium enterprises, or SMEs?would become a reality soon. Sebi?s new chairman, CB Bhave, has given top priority to the issue. He has kicked off a series of meetings with entities and groups involved in setting up a separate SME trading platform as promised by finance minister P Chidambaram in his previous budget speech.
In a recent meting, Bhave asked business chambers?CII and Ficci?and Small Industrial Development Bank of India (Sidbi) to make comprehensive suggestions on the feasibility of a separate exchange for SMEs. Sebi asked CII and Ficci in particular to report on the working of similar exchanges in the UK, Hong Kong, Canada and Australia.
According to sources, ?Various issues in this regard were discussed. For a separate exchange, an investment of over Rs 500 crore was estimated. It was also suggested that instead of a separate exchange, a special wing at the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE) can be set up as both these exchanges have the necessary expertise, technologies and manpower.?
Sebi hopes to make the alternative exchange operational in six months. Last year, Sebi had approved the proposal for a dedicated exchange for SMEs to give them better access to risk capital.
Sebi has been working on the proposal for over a year now. It had also received bids for setting up the exchange from BSE, NSE, Inter-connected Stock Exchange (ISE), Financial Technologies and Sidbi.
However, a view emerged at the recent meeting that since the experiment of OTCEI and Indonext has failed, setting up an SME trading platform with an established exchange could be counter-productive.
The critical issues faced by SMEs are high cost and complexity with compliances, sources said. It?s hard for SMEs to fulfill Sebi?s stringent DIP (disclosure & investor protection) guidelines for tapping the capital market.
Sources however feel that an alternative exchange would help smaller companies raise capital from the equity market rather than be at the mercy of private-equity players. This would be possible if the listing norms are less stringent on the alternative exchange.