Indian stock exchange relaxes criteria for small companies to tap capital market amid COVID-19

Source: Xinhua| 2020-05-27 16:56:42|Editor: huaxia

MUMBAI, May 27 (Xinhua) -- In order to relieve India's small and medium enterprises (SME) under distress due to two-month nationwide lockdown following COVID-19, Bombay Stock Exchange (BSE) has relaxed the criteria to enable such entities tap the capital market.

A circular issued by the stock exchange to supplement the government's stimulus announced earlier this month said, "BSE has amended the eligibility criteria from time to time to strengthen the SME Platform through various circulars. Today MSMEs are facing challenging situations due to the pandemic caused by COVID-19."

Indian SME sector has been starved for debt and equity, with the sector accounting for 48 percent of the country's export, but access to around 18-20 percent of the bank credit. There are 50 million SMEs in India employing 110 million people that contributes to 30 percent of the GDP in Asia's third largest economy.

"The disruption caused by COVID-19 in terms of cash flow to the economy has been unprecedented and has led to distress among the SME segment. At a time, when commercial banks are reluctant to lend for fear of NPAs (Non-performing Assets), the relaxation in eligibility norms for SME listing would enable leveraged SMEs to explore the capital market space and survive this critical phase of economic down turn," said Makarand Joshi, partner, MMJC and Associates LLP - a corporate compliance firm.

As part of a 264 billion U.S. dollars stimulus package offered by the federal government, 6.6 billion U.S. dollars was ear-marked for small and medium enterprises through a fund-of-funds to be set-up separately.

The amendment by BSE has brought down the minimum criteria of net tangible asset for such small companies as also relaxed the positive cash flow requirement from three years track record to any one year, said Sandeep Mandawewala, President, Choice Group - a domestic financial conglomerate, which has helped several companies to raise up to 264 million U.S. dollars so far.

BSE SME platform for listing small companies has so far raised 433 million U.S. dollars for 322 companies of which 79 companies have migrated to the main platform. The total market cap of BSE SME is 2.1 billion U.S. dollars. Enditem