Chandigarh, Nov 26: The guidelines and procedures for setting up of smaller exchanges to cater to the financial requirement of small and medium enterprises are being given final touches by SEBI and are likely to be announced towards mid of December to actively provide alternate finance window.
Dr T C Nair, wholetime Member of SEBI while addressing the ASSOCHAM Conference on Financing the Future Giants here said that in the initial phase, 3-4 licences will be provided to the companies who have the net worth income of Rs 100 crore. He said the BSE and NSE have evinced their desire to set up such exchanges and the objective would be to mobilise resources from the public on the lines of the Alternate Investment Market (AIM) set up in London. Dr Nair further said that the downswing in the stock market is an high opportunity for the investors and there was no reason to panic.
In last October, there were 1100 FIIs operating in India which had raisen to 1500 FIIs in October this year. It is true that they have withdrawn their money to meet their global requirements, yet keeping in view the strong fundamentals of the Indian economy, the stock markets are bound to recover sooner than later, he added.
However, he said the biggest threat due to global meltdown is to the small and medium enterprises whose contribution has been as high as 47 per cent of the manufacturing sector and 8 per cent of the progress are truly innovative.
Therefore, there is a urgent need to develop a mechanism to extend a special package to this sector to enable them to meet their export requirements, keep the jobs and take timely measures to upgrade their technologies to face increasingly tough competition globally, he suggested.
Dr Nair further said that the proposed stock exchanges should be set up as a corporatised entity since inception. It shall convert itself into a demutualised entity and comply with the Securities Contracts.
The exchange for SMEs will be different from existing stock exchanges in terms of companies raising capital and investors investing money in such companies. SEBI has fixed the minimum trading lot of Rs 1 lakh and trading system may either be order driven or quote driven.
Mr A C Verma, Managing Director, State Bank of Patiala announced that his bank had already created a Special Technical Cell to evaluate the applications received from the SMEs and not to have the stringent attitude towards lending against collateral security.
Responding to the query of collateral security raised by ASSOCHAM, Mr Verma said that upto 25 lakh loan applications, the bank will not be insisting for collateral security. He further announced that his bank was launching Rs 400 crore fund for providing cheap financing to the SMEs in Punjab, Harayana and Himachal Pradesh. He also announced that the interest rate shall be lowered down and assured that to create demand, the banks will be fully cooperating with the manufacturing sector.
Mr Verma also said that there will be no dearth of finance for the SME sector from State Bank of Patiala but the SEMs have to create more demand for their products.
The ASSOCHAM-Grant Thronton Study on SME: Smart Money Enterprises has highlighted that SME will need to align their offerings with the prevailing market conditions and in the process, they will need to adopt more efficient business practices. The study further says that there is need to identify a niche in verticals such as healthcare, education, transportation, e-governance, technology including GIS, embedded software and web services.
The study also stressed for creating greater inroads into the domestic market as it will act as a test bed for innovation and new service lines and help in rapid accumulation of value added skills.
The other key spakers at the Conference includef, Mr Ashok Khanna, Chairman, ASSOCHAM Committee on Internal Trade and Chairman, Khanna Watches, Mr D S Rawat, Secretary General ASSOCHAM and Mr Harish, Head of Specialist Advisory, Grant Thornton.