There is good news for small and medium enterprises as they will soon be able to tap the capital market. In fact, SEBI has been working on this project for a while now and its Chairman CB Bhave said it is all set to pave the way for a special exchange for entrepreneurs who can dream big.

"Our past attempts at setting up an exchange for smaller companies has failed. Given this experience, we naturally want to be cautious. We want to understand what went wrong with our processes and then take this matter forward," Bhave said.

RH Patil, Chairman of Clearing Corporation of India, and Non-Executive Chairman of NSDL, said the SME exchange is not going to be profit-oriented. It is to provide an alternate mechanism to SMEs to raise capital, the stock veteran said.

A: The SME exchange is not going to be profit-oriented. If players are getting in to it with that objective, then they are totally wrong. They are not the right candidates for such an SME exchange. There is a large number of small and medium scale enterprises, many of them are very vibrant. They have to grow and they cannot grow purely on promoter money. They have to tap the capital market but they cannot tap the existing stock exchange mechanism, so we have to create an alternative mechanism. In London, they call it the AIM.

A: That is the right approach. We should not dilute any standards which are needed for protecting investors interest and also the integrity of the markets.

A: If that is their way of thinking then they should not get into it. This is not meant for people who want to make money out of it. The SME exchange for long is going to continue as a profit-oriented entity. I am not saying it will incur a huge amount of losses, but it will definitely incur losses for several years to come. There are a lot of developmental costs and SMEs are not in a position to bear all those costs. If bidders think they are the milking cows, then I don’t think they are the right candidates.

A: There is nothing wrong in calling for bids. All sorts of entities will definitely apply because it is an open process. Later, when the regulator frames the rules, and if these entities realize that they are not the right candidates, they will automatically drop out of the whole game.

A: Everywhere, the designs were wrong. For example, OTCI was conceived in such a way that it was doomed to be a failure from the beginning. You have to think of it as a developmental war. If somebody says I am going to make a very profitable venture and is looking for profit in every bit of activity, then that venture will not become profitable. One has to take risks and think of newer ideas. They just went by the traditional thinking that the money is not there. Money will come only when the market actually develops and before the development of the market you just cannot hope to make money out of it.

A: The cost of rising shouldn’t be higher. We had done a study more than 25 years ago for the GS Patel Committee Report. The cost for raising capital for small companies in those days was 25% of the capital raised. If this is the cost, then no company will go and tap the market. Capital markets shouldn’t be made so expensive, so we need an SME exchange which keeps costs down.

A: I am against monopolies. The regulator may even give an opportunity for one more entity, but the point is that the rules of the game should be such that it is not a profit maximizing entity. So, only the serious players will enter the market.

A: I have very outlandish ideas in this area. I am a person who believes that there should be no listing fees, because the company has anyways incurred expenses while issuing capital. Thereafter, equity the instrument changes from one hand to the other, so the real beneficiaries are the investors. They should bear the costs, why should the company continue to bear the costs on a continuous way.

A: I didn’t put any comments because many of my views are outlandish and are not acceptable. So, it is better to keep quiet.