SMEs unfamiliar with capital markets and lack intermediaries: SEBI Chief

Small and Medium Enterprises (SME) face limited access to intermediary facilities like merchant bankers and are unfamiliar with the capital markets which make it challenging for them to go public, said SEBI Chief Tuhin Kanta Pandey on 11, February addressing an event at Mumbai.

“Greater SME participation in markets also diversifies financing channels, reduces risk concentration in the banking  sector,  and  frees  bank  capacity  for  genuine  working capital and priority lending.  Yet, the SME capital market remains under-scaled relative to India’s potential. Many SMEs still hesitate because capital markets feel unfamiliar and there is limited access to credible intermediaries such as merchant bankers. The cost of raising capital through IPOs may also deter many SMEs,” said Mr.Pandey. He added that practical guidance was not clear and internal governance systems to handle SME IPOs have not yet matured making the IPO process cumbersome. 

Referring to SMEs which were misusing the money from proceeds and indulging in malpractices, he said, “SME framework was strengthened so that only entities with sound track records could access public markets and investors are protected,” he said.

SEBI is set to open offices in State capital and a separate portal for SMEs to enable them list easily, he said.