Finance minister P Chidambaram proposed in the budget that small and medium enterprises (SMEs), including start-up companies will be permitted to list on the SME Exchange without being required to make an initial public offering (IPO) of shares.
The move is aimed at boosting entrepreneurship but the catch is that only informed investors can subscribe to the SME issues.
Chidambaram said this platform will be separate from the existing one on which listing can be done only through IPOs.
"This announcement will benefit the SMEs to capitalise their companies without incurring expenditure on public offerings, which is a welcome step," said HP Kumar CMD, National Small Industries Corporation.
The minister also extended the period for which SMEs can enjoy special benefits - even if they outgrow their definition.
"Too many of them do not grow because of the fear of losing the benefits associated with staying small or medium, and to encourage them to grow, I propose that the benefits or preferences enjoyed by them will stay with them for up to three years after they grow out of the category in which they obtained the benefit," he said.
The Federation of Indian Micro, Small and Medium Enterprises said the minister had addressed concerns of foreign multi-brand retailers on fulfilling a government criterion that they must source 30% supplies from micro, small and medium enterprises (MSMEs).
"The budget proposal will ensure that for next three years, suppliers, even after crossing the MSME threshold, can continue (supplying)," said FISME secretary-general Anil Bhardwaj.