Against the tide of shrinking IPOs and traded volumes, BSE wants to list a million SMEs!

The BSE Small and Medium Enterprises Exchange CEO thinks that the exchange has the potential to list a million companies even as both the IPO market and traded volumes have dried up

The BSE SME Exchange which is likely to be launched in September 2011 expects to list 1 million potential small and medium enterprises (SMEs). "Of the total 26 million enterprises in India, around 1 million units have the potential to get listed on the BSE SME Exchange," said Lakshman Gugulothu, chief executive of the BSE SME Exchange in Hyderabad yesterday.

Unfortunately, Mr Gugulothu, new to the capital market, does not know what he talking about.

BSE has in all over 800 companies listed. Not many trade daily. Many are shell companies, which are rigged easily by operators. Moneylife writes about them in every issue of the magazine, but neither the stock exchange, nor the regulator would do much about them. To think that million SMEs can be added to this shallow and hollow market is simply ridiculous.

The overall market liquidity of the Bombay Stock Exchange has gone down sharply over the years. The liquidity is there only in the large-cap companies. Very few retail investors are there to buy shares of smaller companies. Domestic Institutional Investors (DIIs) are not yet a force. Even in the case of blue chip shares, which are traded well in a normally functioning stock market, the traded volumes come from investments by Foreign Institutional Investors (FIIs), and not from domestic investors. But FIIs hardly invest in smaller companies. In this situation, what will create the linkage between the small companies and investors?

Whenever a stock suffers from poor liquidity, investors shun them. This leads to even lower liquidity-which becomes a vicious cycle. All this would be very pronounced in case of small companies Mr Gugulothu wants to attract.

Also, due to a variety of structural problems, the Indian equity markets are in a state of coma. The market for Initial Public Offerings (IPOs) is almost dead and past IPOs have inflicted large losses on investors. To expect investors to buy shares of unknown small companies is a pipedream.

Even if there was liquidity for smaller companies, the concept of an SME Exchange is new to India and will have to prove itself to the investors. Internationally, exchanges for smaller companies have worked only in a few countries such as the US, the UK, Brazil and South Africa. There are several reasons why a small exchange-that too from a declining platform like that of the BSE-is bound to fail badly. But more about that in another article.



Roshin mathew

6 years ago

Market moves with SENTIMENTS. Media has prominent role is creating sentiments in the market especially in media driven markets like India.

So the Success of any new experiments depends on the media sentiments on the concept too. in That sense; a positive attitude towards SME exchange from all media will give a definite boost to the upcoming SME exchanges in India.

Gold breaches Rs 25,000-mark; creates history

Following the US credit rating downgrade by Standard and Poor's, gold zoomed in the overseas market as investors shifted funds from other options like equities and dollar to gold

New Delhi: Gold prices breached the crucial Rs25,000-level for the first time ever in history here, tracking strong trends in global markets where financial uncertainty increased the metal's appeal as a safe investment haven, reports PTI.

With international prices rallying amid concerns that the global economy is slowing, gold in the bullion market here gained Rs460 to set an all-time record of Rs25,230 per 10 grams.

Traders said heavy buying by stockists and investors in tandem with rising global trend, mainly led to the prices touching record level in spot as well as futures trade here.

In addition, some local buying ahead of marriage season also boosted the sentiment, they added.

Gold of 99.9% and 99.5% purity surged by Rs460 each to Rs25,230 and Rs25,110 per 10 grams, respectively.

Sovereigns followed suit and shot up by Rs200 to a new peak of Rs19,800 per piece of eight grams.

Following the US credit rating downgrade by Standard and Poor's (S&P), gold zoomed in the overseas market as investors shifted funds from other options like equities and dollar to gold.

After S&P cut the US credit rating from AAA to AA+, gold prices surged by $44.40 to $1,707.80 an ounce in Singapore amid slump in equities and the dollar.

Silver ready gained by Rs1,300 to Rs59,900 per kg on increased offtake by industrial units and coin makers and weekly-based delivery gained Rs1,605 to Rs59,980 per kg.

Silver coins flared up to Rs66,000 for buying and Rs67,000 for selling of 100 pieces from previous level of Rs64,000 and Rs64,500, respectively.


Alstom spends 28% more on employees in first quarter, but productivity falters

Employees' costs have shot up for the engineering company to Rs94 crore in the April-June 2011 period. Sales, however, have declined by 20% to about Rs280 crore

The cost of employees for Alstom Projects India increased by nearly a third in the first quarter of the current financial year, but strangely this has not produced any growth in sales which in fact decline by nearly 20% in the three-month period.

According to the figures announced by the company a few days ago, the payout for employees shot up by 28%, or about Rs20crore, to Rs 94 crore in the April-June 2011 period from the previous corresponding quarter. However, sales declined from Rs346.41 crore in the first quarter of 2010-11 to Rs279.63 crore in the first quarter this year, a surprising decline for the engineering and power equipment company.

Understandably, the company's operating profit nosedived from Rs51 crore in the first quarter last year to just Rs5 crore in the period this year. It would make shareholders wonder whether the additional compensation and benefits for the workforce has been worth it at all.

The Alstom stock has lost about 20% year-to-date. The share closed at Rs550.10 on the Bombay Stock Exchange today. It is down 8% since the first quarter results were announced on 1st August, against the 7% fall on the Sensex in this period.

The multinational company also provides railway equipment and technology solutions.

It has been a similar story in the previous quarters. Wages grew by 22% in the quarter to December 2010 and by half in the March 2011 quarter even though the number of employees increased only marginally from 3,899 in March 2010 to 3,941 in March 2011. So, it's not as if the company has taken on additional hands.

Then, has the company been paying out quarterly bonuses? A look at the break-up of employee's costs indicates that salaries, wages and bonuses were up by 12% from Rs222 crore in the entire financial year 2009-10 to Rs249 crore in 2010-11. The contribution to provident fund increased by 49%.

There was a major increase in contribution towards 'workmen and staff welfare expenses'. The contribution to 'employee welfare' more than doubled from Rs21 crore in FY10 to Rs45 crore in FY11. Full year sales were lower by 11%, whereas operating profit increased by 4% over the period.




6 years ago

Very good Analysis.Hardly any business channel was able to raise this point about productivity

Russell Davison

6 years ago

The sales per employee for this company in Europe are also on a nosedive. They'll have to lose another 15000 employees to correct these disappointing sales figures and decreasing margins

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