Business Mantra: Faridabad
CA Sanjay Kumar (Author is a practicing chartered accountant)
BSE’s SME exchange is a platform for providing opportunities to raise equity funding to fulfill their requirement of funds for expansion and growth in cost effective manner.
Opportunity for SME Entrepreneur: – Normally in India SME entrepreneurs get their funding by debts may be from banks, NBFCs or friends and relatives. Funding through debts only is costlier funding as interest is to be paid every month and moreover hassles like collateral securities, corporate/personal/ third party guarantees are involved. SME exchange will provide equity investor to the SME entrepreneur. So a lesser risk is involved for entrepreneur and the opportunity of getting funds is available at a lesser cost.
Opportunity for Investor: – Investor who wants to invest the money/funds available with them gets opportunity to invest in good companies of rising and promising entrepreneur at an early stage. More over when investor, invests in companies listed on BSE-SME, then capital gain tax benefit are also lucrative.
When the investor sells the shares after holding the shares for more than 12 months then the long term capital gain tax is zero, while on unlisted shares it is 20 %( after indexation). In case of short term holding (less than 12 months) STCG tax is 15% on shares listed on BSE-SME, while it is 30% on unlisted shares.
So, it is an understood fact that banks provide debts and BSE-SME will provide an investor the opportunity to get equity funding. For a SME entrepreneur, to get listed with BSE, a small onetime cost is involved. Once it is successful in getting equity investor, then there is no periodic finance cost (every month or every year) like debt funding.
Till now 104 companies have been listed on BSE-SME out of which 6 companies have shifted to main board and now 98 companies are listed on BSE-SME. It is to be noted that terms and conditions for SMEs to get listed are very much relaxed even a company with one crore net worth may get listed.
The detail requirement to get listed will be posted in our next article very soon.
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