Whether an SME is struggling or exploding, it needs funds to sustain itself. Innovation, R&D, supply chain, marketing, getting and keeping skilled talent, strategic procurement, and everything that supports business growth demands funds.
Not to mention the uncertain situation like the pandemic that turned the situation overnight, throwing some companies into the dark hole questioning how they will even pay the salary, rent, bills, and overheads and protect themselves from sinking?
On the other hand, because of the pandemic, specific sectors saw a windfall of new opportunities but needed funds to capitalize on the local and global boom and meet excessive demand. They risk missing the boat.
The fact is, the right funding at the right time can make or break a business.
Healthy Ecosystem
The Bombay Stock Exchange (BSE) — Small Medium Enterprise (SME) Exchange offers a fantastic legitimate platform for SMEs to raise capital through equity infusion.
The BSE SME platform got launched on March 13, 2012. And 367 SMEs are listed as of April 5th, 2022, and have raised a capital of Rs 3,897.86 crore and achieved a net market capital of Rs 50,413.69 crore.
The pandemic increased the number of SMEs joining the bandwagon. Over 40 SMEs were listed for IPOs from September 2020 to September 2021, not a big difference from the mainstream 51 IPOs.
Another reason for the BSE SME exchange to grow is the profitable financial ecosystem. SME Exchange has produced, over a decade, a gross estimated return of Rs 3.4 on every Rs 1 invested.
In fact, many SMEs have turned out to be massive multi-baggers for several micro ace investors.
Boosts Exposure, Value, and Credibility
Being well-funded without borrowing is the #1 primary reason SMEs join the BSE SME Exchange. However, there are several other advantages.
SMEs can reduce their debt ratio, reduce costs and create a healthy balance sheet, leading to higher credibility and better financial status. Thus, attracting better join partners, collaborations, more prominent investors and expanding the investor base.
Once the SMEs get listed, they attract better media coverage and PR. This exposure helps raise the brand value of the company, builds a better profile, and thus increases the value and demand of the shares.
Higher Standards and Future-ready
Not every SME gets listed on the BSE SME Exchange, and it needs to match certain criteria. This includes and is not limited to organization, capital restructuring and valuation, transparency, a high standard of corporate governance, better marker strategy, due diligence, effective communication of the corporate, and its equity strength.
For SMEs to get listed, preparation happens on various fronts. Therefore, dedicated SME IPO Cohorts are now incubating and accelerating SMEs’ pathway to IPOs.
Ambitious, growth-oriented SME owners are taking it as an incredible opportunity. SMEs are becoming fundamentally strong, and are able to raise their working standards — getting future — on their journey to the listing.
It’s an excellent start for super ambitious SME owners who want to join the big league — mainstream BSE or NSE. In fact, in a decade, 131 companies have migrated to the mainboard.
(By Videsh K Totaare, MD & CEO, Archers Wealth Management Pvt Ltd)