Bombay Stock Exchange Loosens Rules On Capital Market To Help SMBs

Bombay Stock Exchange (BSE) has relaxed guidelines for how Indian small- to medium-sized businesses (SMBs) can tap the capital market, loosening restrictions on net tangible assets and positive cash flow in order to jump-start the country’s virus-ravaged economy.

In a press release from Xinhua, BSE says the standards for those things being looser now will hopefully alleviate some of the economic trouble from the coronavirus pandemic by letting companies have more leeway to buy and sell stocks.

The release says that standards for the BSE’s eligibility have been modified at times to aid people during particularly stressful economic troubles.

“At a time when commercial banks are reluctant to lend for fear of NPAs (Non-Performing Assets), the relaxation in eligibility norms for [SMB] listing would enable leveraged [SMBs] to explore the capital market space and survive this critical phase of economic downturn,” said Makarand Joshi, partner with corporate compliance firm MMJC & Associates.

The Indian SMB sector includes 50 million businesses, which employ 110 million people and contribute to around 30 percent of the country’s GDP. India has Asia’s third-largest economy, the release notes.

But the pandemic has weakened things, with companies now facing serious deficits in funds. And Indian SMBs have been starved for debt and equity. The SMB sector accounts for 48 percent of India’s exports, but those companies only have access to 18 to 20 percent of the country’s bank credit.

The federal government, in response to the crisis, issued a stimulus package worth the equivalent of $264 billion. Of that amount, $6.6 billion was earmarked for SMBs through a fund-of-funds, to be set up separately.

The pandemic has hit India like it did other countries, driving down exports by 34.6 percent in March and imports by 28.7 percent. Several commodities such as meat, dairy and poultry products were down 45 percent as the pandemic was hitting in March.

As of early May, the country was gearing up to reopen services like ride-hailing in parts of the country that had not been hit as hard by the pandemic.