SME capital market under-scaled: Pandey
SEBI Chairman Tuhin Kanta Pandey on Wednesday rued that despite the developments undertaken in the past, the SME segment is “underscaled” from a capital markets perspective.
Speaking at the India SME Finance and Investment Summit here, Pandey said listings can lead to better governance at such small companies and added that the watchdog had found certain challenges on this front in the past.
“The SME capital market remains under-scaled relative to India’s potential,” Pandey said, adding that entities hesitate because capital markets seem unfamiliar and also due to limited access to merchant bankers. Pointing to progress on listing over the last few years, he added that the cost of raising capital through the Initial Public Offerings (IPOs) may also be a deterrent.
Such entities have a tendency to look at disclosure and compliance as “burdensome”, he said, adding that practical guidance on filing documentation is often unclear.
Stressing on the need for SMEs to raise funds from markets, the SEBI chief said such a move upgrades governance, which can in turn lower cost of capital as markets reward credibility.
“Sometime back, another barrier to access capital from markets emerged due to egregious instances of some SMEs misusing the relaxations available under the SME framework. Such instances adversely affected investor sentiment in SME IPOs,” he said.
There were instances where some SMEs were indulging in unfair trade practices to create a positive sentiment and induce investors into purchasing their securities, Pandey said, noting that both SEBI and stock exchanges have made improvements on it.
Pandey said 1,400 companies have listed on the dedicated SME bourses and their collective market capitalisation stands at INR4.1 lakh crore. Over 350 of these entities have migrated to the main board, he added.The last fiscal year saw 98 IPOs through which entities mobilised INR9,800 crore, which has gone up to INR10,500 crore in 232 listings till January of FY26, he said. Pandey also noted one instance of an SME raising debt through the stock exchange as a welcome instance.
However, there is a concentration of issuances from the west, with the region accounting for 44 per cent of the IPOs in FY26, Pandey said, stressing on the need for deeper outreach beyond traditional centres to widen participation of quality SME.“Stock exchanges and industry bodies are already conducting such structured outreach programmes on SME listing. However, they need to do more to prepare and attract SMEs to the capital markets,” he added.SEBI’s ongoing plans to open offices in State Capitals will also help facilitate easier access to information on listing and post-listing processes, he said.
