Small Industries Development Bank of India (Sidbi) is eyeing greater participation while working with the ever-growing number of small and medium enterprises (SMEs).
With a separate listing platform for SMEs in place, the public sector entity wants to move beyond simple financing and development requirements of the small scale sector.
The government-owned bank has applied to the Securities and Exchange Board of India (Sebi) for a merchant banking licence to help unlisted SMEs list on bourses. Through its venture capital arm, it is also looking at investing in the initial public offers (IPOs) of entities that list on the SME platform, which was launched recently by both BSE and NSE.
?It is true that Sidbi has applied for a merchant banking licence,? said Sushil Muhnot, chairman & managing director, Sidbi. He, however, added that the bank is still evaluating the manner in which the merchant banking unit will be structured. ?We are open to various possibilities, but initially we propose to start it as a departmental activity,? he said.
He further said that Sidbi Venture Capital, which is a subsidiary of Sidbi, has launched a fund that can also invest in IPOs of SME companies listing under SME Exchanges of BSE and NSE.
Interestingly, Sidbi’s approach could come as a shot in the arm for the sagging SME platform that has not seen much action ever since it was formally launched in March. BCB Finance is the sole company listed on the SME platform and only a handful of trades are witnessed everyday.
Traditional merchant bankers do not have a history of working with SMEs and so are reluctant to manage their issues. Also, strict regulatory requirements related to market making has made most of the well-known merchant bankers give this segment a go.
On the other hand, Sidbi’s record of working with the SME sector could come handy as many of the smaller enterprises already have an ongoing relationship with the bank. Not surprisingly, policymakers were also keen that Sidbi should assume a much larger role in promoting the SME platform.
In March, when BSE launched its SME platform, ministry of micro, small and medium enterprises secretary RK Mathur had said that the exchange is trying to get Sidbi on board to act as a merchant banker apart from buying stake in some of the issuer companies.