By: Hem - 12-Nov-2021

SME Exchange Listing: A decade of growth opportunities for SMEs in India

For the past half a decade, The Indian economy has been one of the fastest-growing globally. It has been experiencing consistent growth till about the pandemic set in.

This economic growth was fuelled by a slew of reforms, corrective measures and a variety of socio-economic policies introduced by the Government which resulted in an increase in disposable income and spending for the general public.

In addition, the Small and Medium Enterprises (SMEs) of the country have become the major contributing factor to this economic boost.

There are roughly 6.3 crore MSMEs in India. According to the MSME Ministry, as of May 16 2021, the Udyam Registration portal had registered 30,00,822 MSMEs, replacing the previous method of registering for Udyog Aadhaar Memorandum (UAM). Micro-enterprises accounted for 93% of all registered businesses, with 1.78 lakh small businesses (6%) and 24,657 medium-sized businesses (1%).SMEs are India’s second-largest job creators. With only 20% investment, it provides 80% of industrial jobs. It accounts for approximately 31% of the nation’s GDP, as well as 45% and 34% of total exports and manufacturing output, respectively.

SMEs are classified based on the investment in plant and machinery for manufacturing units, as well as investment in service sector equipment.

Following the latest amendment to the MSMED Act of 2006 earlier this year, SME units producing goods and providing services are now classified as follows:

• A micro-enterprise is defined as a unit with annual revenue of less than ₹5 Crore.
• A small enterprise is defined as a unit with an annual turnover of more than ₹5 Crore but less than ₹75 Crore.
• A medium enterprise will be defined as a unit with an annual turnover of more than ₹75 Crore but less than ₹250 Crore.
• Furthermore, the Central Government may vary turnover limits by notification, which shall not exceed three times the limits specified in Section 7 of the MSMED Act.Despite all of its successes and contributions, SMEs have had to endure their share of challenges including:
• Inadequate access to finance and credit resulting in a lack of capital.
• Inability to attract talented and technologically savvy employees.
• Underutilisation of production capacity due to a lack of infrastructure and utilities.
• Lack of Innovation & creativity.
• Technology and digital knowledge disparities.
• Inadequate marketing knowledge.

As a result of these challenges, Indian SMEs are unable to reach their full potential, falling short of the benchmarks of their international peers and becoming self-sustained. On the other hand, these challenges provide a wide range of opportunities to strengthen the foundation of SMEs in India.

The Indian Government has made commendable efforts to assist SMEs in overcoming these obstacles.SMEs are encouraged to utilise information and communication technology tools and applications in their business processes under the National Manufacturing Competitiveness Programme. The Assistance to Training Institutions Scheme also provides financial assistance to national level training institutions operating under the Ministry of MSME to strengthen SME infrastructure and develop entrepreneurship skill development programmes.

Given the proper arrangement of empowering structure, SMEs in India can emerge to be the backbone of the Indian economy, acting as a motor for developments.

The Bombay Stock Exchange (BSE) SME platform is expected to witness >60 SMEs entering the market in one year (2021-22) to bring up equity funds for meeting their business requirements. In 2020, 16 SMEs entered the market via the initial public offering (IPO) route, raising ₹100 Crore (US$ 13.74 million). BSE announced in June 2021 that it has teamed with the Electronics and Computer Software Export Promotion Council (ESC) to raise awareness about the benefits of listing among small firms and start-ups.

Along with the varied laws that support these enterprises, having a competent, and skilled Merchant Banker like Hem Securities Ltd. can lead them towards their desired success. With over 60 SMEs listed, 600 Cr+ funds raised, coupled with 4 decades of expertise in the equity markets, Hem Securities is a Market-leading SEBI registered Category 1 Merchant Banker who has been consistently awarded for its performance and delivery excellence.

Through the public platform, SME Companies have been able to raise funds successfully and build a brand for themselves. With a display of consistent growth, they have also created a multi-bagger Wealth creation opportunity for investors as well.