A platform that helps T.N. firms raise capital

Updated - March 10, 2022 07:31 pm IST

Published - March 10, 2022 05:25 pm IST - CHENNAI

The National Stock Exchange (NSE) building in Mumbai.

The National Stock Exchange (NSE) building in Mumbai. | Photo Credit: REUTERS

Tamil Nadu may be home to thousands of small and medium enterprises (SMEs), but when it comes to raising funds through bank loans, firms continue to face a challenge. To address this, the Tamil Nadu government is looking at pushing such firms to raise funds through listing their shares on the SME platform of the BSE (formerly Bombay Stock Exchange) and the National Stock Exchange (NSE). This platform, available on the BSE since March 2012, is looked as an alternative to the hurdles to raising bank loans.

The government has been providing assistance for listing and raising money in SME stock exchanges with a maximum subsidy of ₹30 lakh towards total expenditure incurred on SME initial public offering. In the current year, ₹1 crore has been allocated for the scheme.

A senior State government official vouched that raising money through an initial public offering on the SME platform is a very good alternative. “The State government has asked industry associations to look at the SME platform for their members. We have spoken to associations in Tirupur and Coimbatore. The SME listing platform can help build transparency and credibility of the firms, which in turn help in access to funds. Companies from Gujarat have benefited through listing on the SME platform. This culture has to pick up in the State and we are working towards creating awareness,” he added.

The State government is also open to helping more companies get listed, the official said, and allocation would be made as per the needs.

The government has signed a memorandum of understanding with BSE and NSE for creating awareness of the SME platform. While about 363 companies have listed on the BSE SME platform in the past decade and raised over ₹4,000 crore. 10 companies from Tamil Nadu have been listed on the SME platform. The eligibility criteria for listing on the BSE SME platform has been relaxed to enable more companies to get listed.

Some of them include the company should be in existence for a minimum of three years and should have net tangible assets of ₹1.5 crore. It should have an operating profit in any one year out of the last three years.

NSE SME platform ‘Emerge’, too, has criteria such as companies should have a positive net worth and a operating profit for at least any two out of the three financial years.

“SMEs are the backbone of our economy. Our objective is to provide them with equity financing opportunities to grow their business. Equity financing will lower the debt burden leading to a lower financing cost and a healthier balance sheet,” said Ajay Thakur, Head-BSE SME and Start-up.

The listing will also help improve credibility and facilitate access to further financing, he said, adding that the aim of the tie-up with the State government is to reach the last mile.

Chennai-based Thejo Engineering Ltd. was the first company to raise capital of ₹19 crore through the Emerge platform in 2012. The company provides operation and maintenance (O&M) and installation services for the conveyor belt systems for bulk materials, mining and mineral processing.

V.A. George, chairman, Thejo, recalled that the company had decided to expand into Australia, South America, Saudi Arabia, Brazil and Chile. For this, it needed funds. At the time, the company’s turnover was ₹60 crore. “I could have approached banks or taken the private equity route to raise the funds. But we decided to go for listing on the SME platform and use it to improve the governance of the company,” he said.

Thejo expects to end the current fiscal 2022 with a turnover of ₹450 crore. Mr. George also pointed out raising money alone should not be an objective for listing on the SME platform. “Through listing you are offering a stake to a set of investors and you need to maintain a high level of governance standards and also answerable to various stakeholders, including the regulators,” he added.

For companies which have a small capital requirement of a few crores of rupees, the Emerge platform would be ideal.

Mr. George said the Tamil Nadu government is “one of the friendliest governments for businesses” and Thejo got all clearances without any hassle.

The Coimbatore-based independent renewable energy and trading company KKV Agro Powers Limited got listed on the Emerge in 2016 and raised about ₹3.58 crore. It was the first renewable energy sector company to list on the platform. The company, belonging to the group which owns ‘The Chennai Silks’ and ‘Sree Kumaran Thanga Maligai’ , a leading textile and jewellery brand since 1991, venutured into renewable power generation in 2005. Its CMD T.K. Chandiran said the company’s shares were listed at ₹320 a share and now trading at ₹950. “One needs to be ready to meet the compliance requirements of listing, even though it is relaxed in case of the SME platform,” he said.

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