Access to capital markets: UP govt signs MoU with NSE, BSE to boost MSME

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Just days before Prime Minister Narendra Modi lays the foundation of projects worth over Rs 600 billion at a high ticket event in Lucknow on Sunday, the Yogi Adityanath government has tied up with India’s top bourses to facilitate the Micro, Small and Medium Enterprises (MSME) access the capital markets.

UP has signed Memorandum of Understanding (MoU) with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for building the capacity of the state MSME sector to raise funds from the markets and list on stock exchanges.

UP chief secretary and infrastructure and industrial development commissioner (IIDC) Anul Chandra Pandey said modern enterprises should not solely depend upon the conventional banking route for funds, but harness capital markets as well for growth.

Under the MoU, the premier stock exchanges would handhold the MSMEs through a series of workshops, roadshows and consultancy to create awareness about the various opportunities in the domestic capital markets to mop of funds for expanding businesses, SME exchange guidelines, listing processes, compliances with listing agreement etc.

After coming to power last year, the Adityanath government has persistently been encouraging start-ups and MSMEs to access the capital market, such as NSE’s SME platform known as Emerge. The government wants the sector to measure up to the challenges of rising competition and technological advancements for boosting economic activity, faster industrialisation and job creation.

So far, state SMEs have preferred to operate as private entities rather than raising funds from the market and going public, since it dilutes their control on family businesses. However, now there has been growing interest to list on the exchange and brace up for future challenges brought about by globalisation, e-commerce and opening of the domestic markets.

UP has a large MSME base estimated at 5 million, contributing 60% to its annual industrial output. The sector directly employs 40 million people and generates direct economic activity worth almost Rs 1.50 trillion annually. The sector is the second largest employment generator after agriculture.

Currently, NSE Emerge platform has about 165 listed companies, including 4 entities from UP viz. Reliable Data Services Limited (Noida), Jalan Tran Solutions (Ghaziabad), Jet Knitwears (Kanpur) and Tasty Dairy Specialities (Kanpur).

Meanwhile, the Adityanath government would consider providing financial assistance/subsidy to SMEs over the cost of public issue expenses subject to a ceiling to be predetermined. The state had also been exploring the possibility of setting up a government-sponsored SME equity participation fund in partnership with nationalised banks.

UP has flourishing handicraft & handloom, leather, tourism and agro-based industries, which the government wants the new age entrepreneurs to leverage through easy funding options. Listing helps companies gain easier access to capital for expansion and growth, provides visibility to local companies at the national level, gives them high credibility and unlocks valuation.