In the Indian market, BSE is the first exchange to introduce the BSE SME platform for the listing of SME shares. Later, the NSE exchange also launched the NSE Emerge platform for SMEs to list their shares. The two SME listing platforms were set up under SEBI guidelines to promote the growth of small and medium enterprises (SMEs) by providing them access to the required capital. SMEs can go public and raise funds by selling shares in the primary market for growth and expansion.
What is SME Exchange?
SME Exchange is a credible marketplace for listing and trading SME shares. Listing on the exchange has advantages for both SMEs and investors. Listing is beneficial for SMEs to raise funds, build brand prestige and propel business growth. At the same time, it offers investors the opportunity to invest in emerging and fast-growing SMEs with promising growth plans and robust business models.
SMEs wishing to go public can bring SME IPO either on the BSE SME or the NSE Emerge (NSE SME) platforms. Both SME exchanges have different criteria for listing SME IPOs and follow a credible process for listing SME securities. When an SME decides to go public, it is the merchant banker or lead manager who helps the issuing company to select the right SME exchange for listing.
Key Features of SME Stock Exchange in India:
- Any small and medium-sized company with post-issue paid-up capital of not more than Rs 25 crore can list on the SME Exchange.
- The minimum trading lot size for SME shares must not be less than Rs 1 lakh.
- The issue of an SME IPO must be 100% underwritten with the merchant bankers taking 15% from their own accounts.
- The merchant banker of the SME issue will undertake market-making for SME securities for at least 3 years after listing.
Need for SME Listing Platforms in India
The two primary reasons to launch SME Platforms in India were:
- To provide a platform for SMEs to raise capital for expansion and growth.
- Listing on the SME exchange unlocks full potential and business value.
1. BSE SME Platform
The BSE has a dedicated platform for listing and trading SME shares – BSE SME. BSE SME platform was launched in March 2012 and today it is the largest platform in terms of total market capitalization. BCB Finance was the first company to be listed on the BSE SME platform.
In 2012, only 12 SME IPOs were listed, but to date, a total of 520 companies have listed on the BSE SME platform and the total capital raised is Rs 7,049.05 crore. Out of the 520 companies listed so far, 185 SMEs have moved to the BSE mainboard exchange.
With the ongoing boom in the SME segment and active participation of domestic and institutional investors, the market capitalization of the BSE SME Index crossed the Rs 2 lakh crore mark for the first time on January 3, 2024. The reasons for the rising market capitalization of SMEs were a strong rally in SME stocks and a robust number of new IPOs.
As on September 4, 2024, the total market capitalization of all listed SMEs stood at Rs 179,690.10 crore and the market capitalization of SME companies listed on the BSE currently stands at Rs 67,109.25 crore.
The key criteria for listing on the BSE SME exchange include a three-year operating track record, minimum net worth of Rs 1 crore, minimum net tangible assets of Rs 3 crore, and a profitable operating track record in two of the last three years. Check the detailed criteria.
BSE SME IPO Data - At a Glance
Despite liquidity challenges and ongoing regulatory uncertainty in the SME segment, the data for SME IPOs in 2024 was record-breaking. A total of 173 IPOs were conducted till August 2024, raising remarkable funding of Rs 5,965 crore, surpassing the previous year's record of Rs 4,686 crore in 2023.
| Number of Companies Listed on BSE SME | 520 |
| Total Amount of Money Raised till date | Rs 7,049.05 Cr |
| Market Cap of all Listed SMEs on exchange | Rs 179,617.92 Cr |
| Market Cap of BSE SME Listed Companies | Rs 67,092.24 Cr |
| Number of Companies Migrated to Mainboard | 185 |
| Number of SMEs listed as of date | 335 |
*Data as of Sep 4, 2024
2. NSE Emerge (NSE SME) Platform
NSE Emerge is the dedicated platform for listing SME shares on the NSE Stock Exchange. Thejo Engineering was the first company to be listed on the NSE SME platform. To date, 532 SMEs have been listed on the platform, of which 140 companies have migrated to the mainboard segment of the NSE. Companies from various sectors including capital goods, telecom, IT, FMCG, and others are listed on NSE Emerge.
Since 2019, the market capitalization of the NSE SME Board has increased from Rs 12,500 crore to Rs 175,000 crore in July 2024. The data shows that more SME entrepreneurs are looking to list their SMEs to raise funds. The average issue size of SME IPOs has also almost tripled, from Rs 13.44 crore in 2019 to Rs 37.57 crore in 2024 (as of July 2024 data).
Any SME wishing to be listed on the NSE Emerge must have been in existence for at least three years, have positive net worth and positive operating profit and positive free cash flow in any 2 out of the last 3 full financial years. Detailed NSE SME IPO eligibility criteria (link)
NSE SME IPO Data - At a Glance
| Number of Companies Listed on NSE Emerge | 532 |
| Number of Companies Migrated to NSE Main board | 140 |
*Data as of Sep 4, 2024
BSE SME Vs NSE Emerge IPO: A comparison
Let's quickly point out the key differences between the SME listing exchanges; NSE SME Vs BSE SME
| Ownership | Operated by Bombay Stock Exchange (BSE) | Operated by National Stock Exchange (NSE) |
| Eligibility Criteria | BSE SME has comparatively more eligibility criteria regarding net tangible assets, leverage ratio, net worth, etc. | NSE Emerge exchange has comparatively lesser eligibility criteria |
| Issue processing fee | Issue processing fee (To be paid at the time of in-principal approval): Rs 50,000 | Processing Fee: Rs 25,000 Initial Listing Fee: Higher of Rs 50,000 or 0.01% of the issue size |
| Annual Listing Fee | BSE SME has slightly lower annual listing fee compared to NSE Emerge. Annual Listing Fee: Higher of Rs 25,000 or 0.01% of market capitalization |
Higher listing fee: 0.02% of the full market capitalization |
| Technology | Robust Infrastructure | NSE is a technology-driven platform with advanced technological infrastructure than BSE. |
| Trading Volume | BSE SME has comparatively lower trading volume. | The trading volume at NSE is a lot higher. |
| Investor base | BSE SME investor base is more retail-focused. | NSE Emerge platform attracts more institutional investors because of wider investor pool. |
| Number of companies listed | As of April 22, 2024, 510 SMEs have been listed and total funds raised is 6,787 Crores. | As of May 31, 2024, a total of 476 SMEs have been listed and raised total capital of 10,702 Crores |
| Companies Migrated | 188 (As of 30 Sep, 2024) | 140 (As of 30 Sep, 2024) |
| SME Index | BSE SME Index (Launched in 2012) | Nifty SME Emerge Index (Launched in 2017) |
BSE SME IPO Index
The BSE SME IPO Index is India's first stock market index for the SME segment and was launched on December 14, 2012. The index was launched to track the performance of SME IPOs listed on the BSE SME Exchange. SME companies listed on the BSE SME platform will be included in the index constituents from the second day of listing and excluded on the second Monday of the month after three years of listing. The index will contain at least 10 SME stocks at any point in time.
BSE SME IPO Index Performance: From Rs 100 base price, the index has gone all the way up to 100,000. As of Sep 11, 2024, the index closed at 100,803.28. The chart shows static performance till 2021 and after that, witnessed a sharp surge in the index performance.
Sector-wise Market Capitalization: As of May 31, 2024, Capital goods and Telecom have the highest market capitalization on the BSE SME index. The two sectors collectively have 58.44% market capitalization, which is more than 50% of index market capitalization. It indicates that most of the SMEs listed in the BSE SME segment are operating in the capital goods and telecom sector. Miscellaneous, Consumer goods and IT are the other sectors with significant free-float market capitalization.
Nifty SME Emerge Index
Similar to the BSE SME IPO Index, the Nifty SME Emerge Index was launched on November 20, 2017. The NSE has launched the Nifty SME Emerge Index to track the performance of SMEs listed on the NSE Emerge platform. The minimum number of constituents or SME stocks in the index is 20.
Nifty SME Emerge Index Performance: NSE SME Emerge Index value rose from 1000 to 16,266.78 by 9 Sep 2024. To date, the index has delivered 70% returns in the last 1-year return.
Nifty SME Emerge Index Sector-wise Market Capitalization: As of August 31, 2024, capital goods and information technology has around 45% of the index market capitalization on the NSE Emerge, followed by healthcare, construction, and service sector with 9.98%, 6.75%, and 6.12% market capitalization.
