Sebi mulling whether to allow loss-making cos list on SEs

Market regulator Sebi today said that it was considering whether or not to allow loss-making companies to list on stock exchanges.

"Sebi is considering whether to allow non-profitable firms to list on exchanges," executive director Usha Narayanan told an Oxford-India business forum this evening.

Under the existing norms, only those companies which have been making profit for the previous three years can go for a listing, though exemption is given to loss-making entities to go public with a caveat that they can do so only with pre-determined issue price. But this clause prevents a company from fully realising its true value.

Meanwhile, she also informed that the regulator was contemplating to shift illiquid shares from the main exchanges to the recently set up SME exchanges.

Presently, there are large number companies listed on the BSE not attracting enough trading interest. Given that many of these companies fall under the SME category, the regulator is mulling to shift them to the SME exchange where they could attract investors' interest.

Currently, the SME exchange started by BSE has only one company listed whereas there is none on the NSE platform.

The exchanges were working on SME platforms for long. Sebi had in September 2011 granted permission to the BSE to launch its SME exchange while the NSE received approval in October.

So far, MSMEs, which number over 26 million and contributing to 15% to GDP have been allowed only debt-financing options, without any access to alternative equity options.