Rajasthan, too, had said that it would reimburse up to Rs 2.5 lakh towards the IPO expenses for SMEs.
Small Industries Development Bank of India (Sidbi) had set up a venture capital fund, SME Growth Fund, to provide easier financing options to SMEs. The fund targeted a corpus of Rs 500 crore and is currently in its divestment stage.
The BSE and the NSE had launched separate SME platforms in March 2012, after the Securities and Exchange Board of India (Sebi) came out with easier listing and disclosure guidelines to help small companies tap into the capital market. This is the first time that the segment finds itself in the throes of a bear cycle.
More than a third of the SMEs listed on exchange platforms since 2012 are trading in the red. Among the 225 actively traded scrips, 85 have shed more than 25 per cent this calendar year. About 42 per cent have slid more than the Sensex, which is down 20.6 per cent year-to-date.
"The primary cause of the fall in share prices is lack of buyers. At a time when there are so many companies available cheap on the mainboard, investors are reluctant to put in money in SMEs. The current situation has prompted promoters of unlisted SMEs to look at alternative sources of funding and explore the possibility of listing," said Gaurav Jain, director, Hem Securities.
Analysing SMEs can be a challenge as they are not tracked by analysts and there is not much information in the public domain. This means investors are left to themselves when it comes to assessing the fundamentals and gauging the credibility of promoters.
The SME segment has been grappling with issues, such as lack of liquidity and lacklustre institutional participation. According to experts, the need is to bring in priority investing from big institutional players, and tweak the lot size to improve liquidity.
Besides improved transparency, an IPO route for SMEs reduces their dependence on debt financing and helps them maintain their debt-equity ratio efficiently, said experts. Listed SMEs with good ratings can get loans at lower interest rates than the market.