New Delhi, Apr 17 (KNN) The new framework for listing small and medium enterprises (SMEs), which would enable companies to be listed without the mandatory fund-raising, could be implemented in the next three to four months, said a media report quoting a senior official of Securities and Exchange Board of India (SEBI).

SEBI has formed an expert panel comprising stock exchange officials, legal and consultancy professionals and representatives from private equity and venture funds. The committee would review existing norms and suggest guidelines to allow companies to trade on the SME platform, without the prerequisite of an initial public offering (IPO), according to the report.
 
This year, in addition to normal Initial Public Offerings (IPOs) by SMEs on the SME exchange, the Budget has allowed SMEs, including start-ups to list on the SME exchange without being required to make an IPO, with the issue being restricted to informed investors.

The SEBI official said the new framework would give better visibility to smaller companies and help venture capital funds and other early-stage investors to make exits.
 
To encourage more number of SMEs to list in the SME Exchange, SEBI will make it easier for the issuers and other participants such as investor bankers.
 
SEBI is also considering relaxations to the obligatory underwriting and market-making for merchant bankers, along with lower dilution requirement for promoters. According to current norms, an issuer has to dilute at least 25 per cent equity through SME IPOs.

For SME IPOs, investment bankers are responsible for market-making for at least three years and the IPO has to be fully underwritten.
 
Members of the SME expert panel include NSE Vice-President Hari K, BSE-SME Exchange’s Ajay Thakur, President of Federation of Indian Micro, Small and Medium Enterprises, Delloite senior advocate Avinash Gupta and Indian Venture Capital and Private Equity Association President Mahendra Swarup.
 
The first meeting of the panel set-up by SEBI, to implement the budget announcements made by Finance Minister P Chidambaram in this Union Budget was held on April 9 in Mumbai.
 
“The impediments to issues on SME Exchanges in larger number can be attributed to three major factors that is lack of enthusiasm for these amongst investors, reluctance of Merchant Bankers to take on the assigned responsibilities and high cost to issuers,” said President of FISME V K Aggarwal.
 
Further, FISME also stressed that to enable SME exchanges to take off, a stipulation from Government of India was needed for FIs, MFs, Insurance companies and Banks to invest certain small portion of their funds earmarked for capital market, to issues on SME exchanges. Additionally, the lender banks of the issuer(s) may also be encouraged to subscribe to issues of their borrowers with whom they may have taken exposure and enjoying extended satisfactory relationship.
 
FISME expressed its concurrence with SEBI on dispensing with the condition for Merchant Bankers of market making for three years. 
 
Besides senior officials from Ministry of Finance and Ministry of MSME and associations like FISME and FICCI, the SEBI Working Group panel includes representation from Merchant bankers, SME Exchanges, VC and PE associations and consulting companies. (KNN)