SEBI Issues New Guidelines for SME Exchange

SEBI has come up with new guidelines for SME exchange. SEBI has set a post-issue upper limit of Rs 25 cr capital at face value for the companies that wish to get listed on such exchanges. If the company reaches this upper limit it wouldn’t be allowed any follow up issues, any follow-up issue has would only be permissible if new capital doesn’t not exceed Rs 25 cr.

In case companies listed on SME platform exceeds the Rs 25 cr limit, the company will be compulsorily shifted to the main board of the exchange. SEBI has absolved SME companies on SME exchange of requirement of submitting quarterly number, but they can do it on half yearly basis. Such companies are also will have privilege of forgoing the need to publish their results instead they can put their result on website.

German Government to sponsor training program for Indian SMEs

The German ministry of Economic Cooperation will sponsor training program to five MSME associations in the country to help them improve efficiency and their business expertise.

The German ministry has chosen five different associations from different states for this program. The associations from Madhya Pradesh, Punjab, Haryana, Gujarat and Indian Industries Association. The German government through two of organizations- the German Confederation of Skilled Crafts (ZDH), the apex body of the German Skilled Crafts-SEQUA will impart training to the Indian associations. The program is design to improve management expertise, to bring in more professionalism and help companies in improving their access to finance and other services.

The Indian association which are going to part of this program are Federation of Madhya Pradesh chamber of commerce and industry, Indian Industries Association IIA, Mohali Industries Association in Punjab, Gujarat chamber of Commerce and Industry and Faridabad Small Industries Association in Haryana.

MSMEs Big Potential of Pushing IT Spending: NASSCOM Study

Nasscom has come out wiht a study pointing towards huge gap in IT adoption Micro, Small and Medium Enterpises (MSMEs). It has has also pointed the huge untapped potential. According to Nasscom the IT penetration in manufacturing sector is abysmal and SME companies hardly make any major investment in IT.

The IT adoption amongst SME & MSMEs is very high in financial and accounting domain but lag behind in areas of CRM, procurement, production planning and supply chain management. SME companies hardly invest in automation and IT solution for enhancing production efficiency. The study found that though rate of IT adoption was at 75% in finance & accounting amongst companies but it just 18% in manufacturing process and even lower rate of 16% in ERP solutions.

Such low adoption of new technology imperil the chances of gaining competitiveness not just domestically but also in global markets as a lot of these SMEs compete in export markets. According to the study Indian SMEs & MSMEs spent meagre 1% of their total revenue on IT adoption, which was way below the global average of 4.5%. Lack of IT spending is crucial challenge for government which wants to improve both efficiency and competitiveness of Indian manufacturing and make India leader.

The Nasscom study also highlighted both demand side and supply side issues resulting in poor IT adoption amongst SMEs. While lack of internal IT expertise, affordable solutions, complexity of adoption, and lack of service providers was the issue with demand side, the supply side constrains were lack of last mile connectivity, support costs & qualified systems integrators.

A new TV show for SMEs

In line with the increasing importance of SME’s in the Indian economy, the country’s leading business channel CNBC Awaaz in association with Entrepreneur Magazine has launched a new TV show entirely focused on this segment. The show named ‘AWAAZ Entrepreneur’ launched on May 15 will focus completely on SMEs in India.

The business channel aims to reveal the arduous but rewarding journeys of various SMEs and also bring out various ideas, options & solutions available to various sections of our society who yearn to venture out and make it big on their own.

The show will profile SME’s and talk to various stakeholders. The series will also showcase the journeys of eminent industry figures, who have gone through the SME phase and have now transformed into larger businesses. Further, the show will also entertain queries of individuals across the country through an expert.

SEBI Sets Guidelines for Market Makers on SME Exchanges

After allowing exchanges to set up separate trading platform for small and medium size companies, the Securities and Exchange Board of India (Sebi) has issued guidelines for SME (small and medium enterprises) exchanges with respect to market making activity. Sebi has now made market making process mandatory for SME scripts and has laid down terms for members of the exchange who will be willing to engage in market making activity.

The market makers would bring in more liquidity and continuity in buy/sell activity on the exchange. Market makers would be required to provide 2-way quote for 75% of the time in a day. The minimum depth of the quote shall be Rs 1 lakh. However, investors with holdings of value less than Rs 1 lakh shall be allowed to offer their holding to the market maker in that scrip, provided that he sells his entire holding in that scrip in one lot to the selling broker.

The new Sebi guidelines also limit the number of market makers for a particular script; it has been set to five market makers. Sebi has also set several qualifying criteiras for becoming market maker.

Government to jointly develop Food Parks with Foreign Countries, SMEs to Benefit

Food Processing Industries minister Subodh Kant Sahai has said that government has signed a MoU (Memorandum of Understanding) with Italy and France to set up joint food parks. Mr Kant also stressed that this joint food park model will immensely help the food processing industry and will also be prove to be future model for food processing industry in India.

In an interview Mr Kant said that government was in opinion that country needed to develop its food processing industry with help of those who had most of the experience. Thus, government went in favour of aligning with countries like France and Italy which have vast experience in food processing industry.

He said that the foreign expertise will bring in both large investments and new technology to the food processing industry in India and will help the nation in developing mega food processing parks with the help of foreign capital and technology. The Food Processing Ministry has demanded ECB (external commercial borrowing) facility being extended for bringing equipment to the mega food processing parks by the companies involved in its development.

Highlighting the lack of capital financing in the food processing industry and reluctance by the financial institutions and the banks to fund SMEs in the food processing industry, he also stressed for the need of venture capital fund to inject growth into this sector, while mentioning the Rs 10 bn funding provided by the apex body NABARD.

SIDBI to receive $600 mn loan from World Bank and Japanese Agency

The Financial institution Small Industries Development Bank of India (SIDBI) is receiving loan worth $600 mn from two international development agencies to provide credit to Micro and Small & Medium Enterprises. These loans are expected to be received by the Indian financial institution during the period 2010-11.

World Bank, one of the providers of this loan, amounting to $300 mn, would be utlised by SIDBI solely for the purpose for providing credit to MSME and SME sector. The SME sector will account for the larger pie of $200mn while remaining will go to the MSME sector.

The other $300mn, which will be provided by Japan International Cooperation Agency (JICA), would be utlised by SIDBI for financing energy efficient projects of Micro and Small & Medium Enterprises. Such disbursement will be given to MSMEs which have incorporated energy efficient technology and require capital to further finance their projects. These loans will be soft loans and would be made available to the companies at concessional rate.

Both of these financing arrangements by SIDBI is going to benefit MSME and SME sectors, which are always in dearth of funding and have been suffering a lot for past two years due to financial meltdown. The measure to provide soft loan on long term basis will boost these companies not only financially but also technologically as they will be able to adopt new and efficient technologies for their production and services.

Factoring Services Mooted for SMEs

The Ministry of MSME has mooted the idea of allowing financial Factoring services for Micro and Small Medium Enterprises. It is in discussion with Finance Ministry on proposal for factoring services.

Factoring services are still niche domain in credit financing in India and is largely domain of a few international banks, though financial institutions like SIDBI along with nationalized banks have undertaken study of providing factoring services to various small and medium enterprises.

Factoring services involves raising capital through leveraging its accounts receivable (credit sales) to gain access to cash. The financial institution providing factoring services uses its own mechanism to provide upto 80% of accounts receivable to the client. But, such kind of services is yet to take-off for SMEs.

The ministry is examining the legal and regulatory aspects on the proposal, which would require legislative amendments in terms of taxation and financing.

The credit-deprived Small and Medium Enterprises (SMEs) are likely to benefit from the concept 'factoring services' as it would be an alternative window for SME financing in India. Dinesh Rai, Secretary, Ministry of MSME recently motioned that the Ministry of Financial Services are not too much in favor of legislative support. But, he feels that if there is no legislative support, it will be difficult for SME players to attain success in a big way.