Mr. Ajay Thakur, Head of BSE-SME & Startups at BSE India, shares insights on the evolution of the SME and Startup platforms, highlighting their role in providing new opportunities for smaller businesses on the Bombay Stock Exchange.
Mr. Ajay Thakur explained that the SME and Startup platforms were created in response to the need for stock exchanges tailored to smaller businesses. The goal was to provide a pathway for SMEs to list with more manageable eligibility and compliance requirements, eventually enabling them to migrate to the main board as they grow. SEBI introduced guidelines for SME exchanges in 2010, and BSE launched its platform on March 13, 2012. At that time, financial literacy about equity funding was low, and it took about three years to persuade stakeholders to support the new platform. Currently, there are 354 SMEs listed on BSE, which have raised Rs 3750 crore and achieved a market capitalization of Rs 40,500 crore. Although the size of listed SMEs is still relatively small, Mr. Ajay Thakur is optimistic about future growth.
The SME listing criteria are kept simple to encourage participation. Companies must have a paid-up capital below Rs 25 crore, be in existence for at least three years with operating profit in one year, and have net tangible assets of Rs 1.5 crore. Mr. Ajay Thakur noted that fears about compliance have been addressed by keeping the norms straightforward. Approximately 33% of listed SMEs have migrated to the main board, indicating that the compliance process is manageable and beneficial.
Regarding startups, Mr. Ajay Thakur mentioned that BSE launched a platform for them in December 2018, which became operational in August 2019. To date, 12 technology startups have listed, with another 5-7 in the pipeline. Startups need to be operational for at least two years with a positive net worth, or if not registered, they must have a minimum paid-up capital of Rs 1 crore. This platform helps startups raise funds even if they do not receive angel, VC, or private equity funding.
To encourage listings, BSE engages with startups and SMEs by creating awareness about the benefits of public listing and connecting them with professionals such as merchant bankers and chartered accountants. The platform is open to various types of investors, including private equity, venture capital, retail investors, and high-net-worth individuals. Startups and SMEs that list on BSE can later migrate to the main board if their paid-up capital exceeds Rs 10 crore and their market capitalization surpasses Rs 25 crore, provided they receive approval from two-thirds of non-promoters. This migration allows them to compete on equal footing with larger companies.
Key requests from startups include funding and liquidity for investors. Listed startups benefit from higher visibility, access to pure equity funds, stronger balance sheets, liquid ESOPs, and flexibility for investors to enter and exit as needed.
Mr. Ajay Thakur highlighted that BSE is working to deepen and broaden the capital market, with over eight crore investors now participating. The exchange is continually creating awareness through various programs to support funding for SMEs and startups.
Challenges for startups seeking public listing include high expectations and fears about compliance, which can shift focus from business operations to managing regulatory requirements. Mr. Ajay Thakur acknowledged these challenges and emphasized BSE’s ongoing efforts to address them and enhance financial literacy among promoters. He believes that the platform provides significant opportunities for wealth creation and business growth.
