Emerge came into existence in 2012, when SEBI and the central government decided to launch a particular platform to help raise funds for the SME sector.
Gagandeep Singh, who represents the western regional office for the National Stock Exchange (NSE), says the need of the hour is for SMEs to raise funds from the market. “There was a huge gap between equilateral-based funding and the main board listings of the SME companies. So to check that the government and SEBI came out with this particular platform, Emerge, and hence NSE was mandated for this portal,” he says, adding, “The very first listing came in September 2012 itself, and the very first company came from the southern region of India. We were very happy about it, though we sit in Mumbai, we see the enormous potential it has.”
NSE does a lot of awareness sessions across India and not just tier I cities. Gagandeep says tier II and III cities are the most focused areas for them because that is where they actually see the SMEs. “We were pretty surprised to see the kind of facilities some of these SME companies have, like state-of-the art technology being used and the kind of decentralising operations that they have,” he adds.
They are ready for it, it’s just that they didn’t have an avenue to celebrate that and Emerge came out as a brilliant platform. They can now showcase their talent in terms of how they’ve been functioning financially and how they can reach out to the investors and the larger audience. Until now, they were either funded through family and friends or through government funding, which is subsidiary-based funding, or from the banks, which is collateral-based funding.
“So I guess the Emerge platform is what really made sense to them. Our eligibility criteria is also very simple. SEBI has instructed that any company whose post issue paid up capital is less than Rs 25 crores can apply. The company should be in existence for the last three financial years, and last two should be financially profitable for the company. This means there should be cash profits in the company. Apart from that, we check the promoter background, how the promoter is and we would want that the company should be growing from here on right?” says Gagandeep.
Here are the excerpts from the interview.
SMBStory: What opportunities do you see for the SMEs as far as raising capital is concerned?
Gagandeep Singh: There are a plenty of opportunities for the SME sector. Not just that they access the capital at the wider end but they also make themselves more credible, more visible, and more corporate-governed company for the outside world to look at them.
We have been talking about Make in India initiative, about ease of doing business, and Digital India, so all these factors will act as a benefit for the SME sector.
Unfortunately, this is not the right platform for the startups as of now, but we are trying to mend some eligibility criteria where we can see if we can have companies who would want to list and but they are not very profitable in the beginning. We are currently working on it, nothing concrete but we understand that there is this huge gap and we should be able to mitigate that gap.
SMBS: What has been the impact of Emerge so far?
GS: We have about 15 odd companies on the NSE main board and that’s not even the real story of India. The true story of India is in the SMEs. We want to be an enabler and to connect the dots for them with the market. Emerge, which already has about 140+ companies on the platform, has raised about Rs 22000 plus odd crores, the market cap is almost about Rs 12,000+ crores for these SME companies so that’s a huge number to celebrate for sure.
But this is just the beginning, and I feel that there’s a huge path to cross and we want these SME companies to really look forward to make themselves more governed because after demonetisation and after GST come into place, I guess the business will be more transparent. It will be more equipped to deal with the iniquities of the current financial needs of the economy.
SMEs are the biggest enablers for employment in the country. We want that instead of people going out they should stay here. We could use the kind of talent in our companies itself, so ESOPS are a very good idea to retain talent for these companies. We definitely see a growth in this, and we would want to be a catalyst for this growth with them.
SMBS: What are the trends you see in the SME sector as far as digitisation is concerned? How are they in their digital journey so far and what do you see lacking?
GS: So more or less, we have seen that SMEs are a one-man show and they want to do everything themselves. Starting from technical decisions to signing the bills, they want to be involved everywhere, right? But that’s not exactly how you can build a business which can grow leaps and bounds by only depending on one person.
Yes, that can be the pushing force for it. Digital imprint makes a huge differentiation, we want companies to go a little more digital. Artificial Intelligence (AI) is a farfetched dream for sure but maybe we may see that coming as well. But the basic shift that we’ve seen is the understanding about the technology.
How they can really shift from manual work to change that. SMEs are going for German machine, Japanese culture. They’re investing money in that. They want to find that cutting edge that can differentiate them from a competitor, so digital is one of the areas.
Second, the way they record their financial statements. Obviously, everybody has a chartered accountant who takes care of it but companies have now started taking care of introducing Tally and ERP systems, which we hardly used to see in the SME sector.
There is a shift happening for sure, and the trend is the enhanced digital impact in the business has also led to a huge amount of cost saving for them in both ways -- in human resource and also for weighing down the expenses for the company.
I guess that is the shift that we see right now. Apart from that, we are also focusing on technology-based companies. We understand that at the initial stage they will not be profitable, and one of the criterias to get listed is to be profitable but we are trying our ways as to how we can support them and handhold them.
Some of these are companies that are doing a brilliant job but because of cash crunch and difficulty in accessing capital, they’re having a tough time in the market. So that’s one initiative we are currently looking at. We want fintech companies to be a part of it for sure, also not just fintech but also the other technology-based companies.