Finally, National Stock Exchange (NSE) has been able to launch the first of its kind SME platform. Will the concept help Small and Medium Enterprises (SMEs)?
Ravi Tyagi: The EMERGE platform of NSE will help a large number of entrepreneurs and companies in the country with growth potential  to raise productive capital. The platform  will create an alternate viable option for the smaller companies to raise risk capital from informed investors looking for opportunities to invest early in promising companies. Currently there are a large number of SME's who want to grow and expand their businesses, but don't have access to a transparent way of raising capital.

Will this platform provide higher visibility to Indian SMEs?
Ravi Tyagi: Definitely, listing on EMERGE will provide high visibility to emerging companies among a large community of retail and institutional investors. The shares of the companies can be traded through more than 2 lakh trading terminals of NSE across the length and breadth of the country. Smaller companies are not often researched by rating agencies and therefore don't get enough visibility, but NSE is facilitating research on such companies through the well established rating agency Crisil. This will help investors understand these companies better and see the potential of investing in them.

Why do you think these companies should go public?
Ravi Tyagi: Going public offers the emerging companies an alternate option to raise capital, from a more diversified set of investors. This capital could be used for growth,  innovation or any other bonafide need of a growing company.  Listing will also provide liquidity for the early risk investors in the company.

What kind of bottlenecks did you face in bringing up this concept to the millions of SMEs present in the country?
Ravi Tyagi: I don't think we have faced any bottlenecks as such. We have found the government and the regulators very keen to develop this market. We have tried to build an eco system , so that market makers can get the backing of nominated investors, a role that can be played by qualified institutional buyer (QIB), Venture Capitalists (VC)or Private Equity (PE) funds. That made it easier to persuade merchant bankers to perform the role of market makers for a period of three years, which is mandatory according to SEBI rules.

We understand that NSE and the government want that 'EMERGE' should be a success. So, to promote the concept what basically are you initiating at the moment?
Ravi Tyagi: We need to create awareness about the new asset class among investors so that they understand the product when they invest in small growing companies. Also due importance is being given to educating and handholding SMEs to understand this new option for raising capital and helping them with a road map to listing.

We have actively engaged with all the stakeholders, for instance various classes of risk investors like HNI's , Institutional players and alternative investment funds,  to make them aware about the opportunities of investing in the  best emerging companies of the country, through the NSE platform. We have also worked on a credible admission process, which will give confidence to institutional investors to invest on the SME platform. This, in turn, will help in getting a larger pool of investors to co-invest with them. We are in touch with a large number of companies to educate them about this new option for raising capital

How do you motivate SMEs in India to be part of this new emerging concept?
Ravi Tyagi: You don't need to motivate companies which are growing fast and which need capital. I already see a serious number of SMEs interested and ready to walk the path of listing on EMERGE. As the activity on platform picks up and we see some more successful listings, I am confident a large number of SME's in the country will be motivated to come forward.

How many SMEs have linked up with you at the moment as you have already mentioned recently that there are few of them in the pipeline? Could you tell our readers about your future plans from now?
Ravi Tyagi: Capital raising is always subject to overall market sentiments. We are witnessing interest from companies and merchant bankers and several transactions are in various stages of planning. We expect the activity on the platform to build up quarter on quarter from now onwards. We will be happy to see at least 10-12 companies raising capital on this platform, in the next one year.

What will be the criteria or minimum requirement for getting listed in the SME Exchange?
Ravi Tyagi: According to SEBI regulations, companies with post-issue face value of capital up to Rs 25 crore can raise funds and list on Emerge. Companies with post-issue face value of capital between Rs 10 crore and Rs 25 crore have the option of migrating to the main Board and vice versa.

The listing requirements are simpler on the SME platform. The exchange's admission and diligence process will help in addressing investor expectations. As a part of the process, companies are being encouraged to get voluntary grading done by rating agencies and will also be subject to certain additional due diligence. Research reports on a company's business fundamentals and corporate governance will be available on the day of listing. Post listing, compliance is similar to the main board with certain exemptions to SME's in reporting requirements.

Do you think that with the launch of the SME Exchange, the international venture funds, which are not coming to the SME sector, will start flowing in the sector?
Ravi Tyagi: The SME's that list on the platform  will be fast growing businesses and we hope that this platform coupled with all its unique features, will encourage international VC/PE funds to invest in these fast growing Indian businesses.

What is your message to the SMEs in the country?
Ravi Tyagi: We are all aware that there are thousands of entrepreneurs in our country, with high aspirations and innovative business models. My message to them will be to also work on their organization structures and put in place a professional management team, so that they have the inherent strength not only to attract the best of investors,  but also the robustness to grow and emerge on a bigger stage.

(Namrata Kath Hazarika can be contacted at namratakh@tradeindia.com)