In a bid to save small investors from fly-by-night promoters, the Securities and Exchange Board of India (Sebi) is toying with the idea of putting the onus of recommending a small and medium enterprise (SME) for going public, on the top five or 10 nominated investment banking advisors.
The regulator is also not inclined to relax any of the disclosure norms for SMEs planning to raise funds through the proposed SME exchange (SMEX), keeping the investor interests in mind. The exchange was proposed to cater to the capital or long-term financial needs of small and medium enterprises (SMEs).
Protecting investors’ interest on the one side and that of the SMEs on the other was the biggest task in front of the regulator and it would take some time to strike a balance before setting up the exchange (SMEX), said CB Bhave, Chairman of Sebi, at a conference organised by the SME Chamber of India on Saturday.
“We have to ensure that the promoters who raise funds today and disappear tomorrow do not have any place in these initial public offerings (IPO). Top five or 10 investment bankers will be licensed to approve such offerings,” Bhave added.
Deploring that most of the investment bankers were not entertaining the SMEs seeking investment advisory, Bhave said Sebi had received several complaints.
The Sebi, which is holding consultations with various interest groups in setting up the SMEX, is planning to close the window by this month-end. Based on various suggestions received, the regulator would prepare draft proposals, to be put forward to its board for approval. The Sebi board has already granted its tacit approval for setting of the SME exchange.
Sebi is also looking into ways of bring down the cost of transactions in SME fund raising processes by courting internet based technology. “Though we cannot bring down the cost of disclosures, the cost of transaction in public offerings could be brought down by using internet, by not consuming paper,” Bhave said.
Lower cost of raising funds is necessary to save the global competitive edge of the SME exporters. SMEs account for over 40 per cent of the country’s exports.