November 15, 2009
Economic Times
Rajeev Karwal has a habit of getting into uncharted territory. He has done it again. Just as he had taken BPL, LG, Samsung, Electrolux and Philips to the next level, so has he embarked on the MSME space with a mission.
His company Milagrow has recently brought out a voluminous report on the state of the MSME sector in India and also in European and American countries.
The findings are quite revealing. MSMEs do not need to be pitied and encouraged to grow as they are perceived to be on the fringe of the economy contributing nothing or precious little.
It is in fact, the other way round. Large corporations are few and far between compared to the millions of MSMEs around every economy . This large number adds up to a huge chunk which can seriously alter the direction of the economy.
The only difference is that they cannot speak for themselves as they are individually very small. In this scenario, having a specialised stock exchange for MSMEs may not make sense for the following reasons .
Most MSMEs are not registered businesses but proprietory businesses. To participate in a stock exchange they ought to be registered with the Registrar of Companies whose norms of paid up capital and authorised capital do not match with the profile of MSMEs.
MSMEs do not need to raise crores of rupees. They need a few hundred sometimes or maybe a few thousands . For this to come over to the exchange in Mumbai and hob nob with the IPO artists would cost more than the money they need.
The other sources of funds such as MFI (microfinance institutions) lending or venture / seed capital.
These sources of funding correspond to the social checks and balances that should be in place to hinder a company from raising public money.
Otherwise, how would it be possible to find out if large companies are not raising public money before completing three years stipulated time by SEBI through hundreds of front MSMEs floated for this purpose?
None of the MSMEs are connected to the Internet. Trading may be over the Internet but MSMEs will be totally oblivious of the trading and its benefits.
Instead of having a centralised exchange, it would make more sense to have regional MSME exchanges who cater to the unique needs of each region.
A ventre capitalist or seed capitalist network also serves the purpose of start ups and micro businesses. This serves the needs of MSMEs better than an exchange where the premise or presumption is that a stock exchange is a place where companies raise money from individuals or companies whom they do not know personally and do not need to know. Formal and structured funding from unknown entities is good for large amounts of money.
For small amounts of money, which the MSME needs not to grow but to survive . Therefore, a stock exchange for MSMEs may be a square peg in a round hole.
Milagrow has decided to keep their consulting activities only for the MSME sector and refuse to consult for the large companies as earlier precedents in other countries have proved that large companies take up a lot of mind space and occupy most of it to the neglect of the MSME sector.
This would be self-defeating having waylaid the very purpose for which the exchange would be set out for. As a result, votaries of the MSME exchange would do well to ponder.
THE MSME LABYRINTHE
Most MSMEs are not registered businesses but proprietory businesses. To participate they ought to be registered with the Registrar of Companies whose norms of paid up capital and authorised capital do not match with the profile of MSMEs. MSMEs do not need to raise crores of rupees. They need a few hundred sometimes or maybe a few thousands . For this to come over to the exchange in Mumbai and hob nob with the IPO artists would cost more than the money they need. None of the MSMEs are connected to the Internet. How do you activate
