Mumbai, February 11 Sebi Chairman Tuhin Kanta Pandey expressed regret on Wednesday that, despite the developments undertaken in the past, the SME segment is "undersized" from a capital markets perspective.
Speaking at the India SME Finance and Investment Summit here, Pandey said that listings can lead to better governance at such small companies and added that the regulator had found certain challenges in this area in the past.
"The SME capital market remains underdeveloped relative to India's potential," Pandey said, adding that entities hesitate because capital markets seem unfamiliar and also due to limited access to merchant bankers.
Pointing to progress on listing over the last few years, he added that the cost of raising capital through initial public offerings (IPOs) may also be a deterrent.
Such entities tend to view disclosure and compliance as "burdensome", he said, adding that practical guidance on filing documentation is often unclear.
Emphasizing the need for SMEs to raise funds from markets, the Sebi chief said that such a move improves governance, which can in turn lower the cost of capital as markets reward credibility.
"Some time ago, another barrier to accessing capital from markets emerged due to egregious instances of some SMEs misusing the relaxations available under the SME framework. Such instances adversely affected investor sentiment in SME IPOs," he said.
There were instances where some SMEs were indulging in unfair trade practices to create a positive sentiment and induce investors into purchasing their securities, Pandey said, noting that both Sebi and stock exchanges have made improvements in this area.
Pandey said that 1,400 companies have listed on the dedicated SME bourses, and their collective market capitalization stands at Rs 4.1 lakh crore. Over 350 of these entities have migrated to the main board, he added.
The last fiscal year saw 98 IPOs through which entities mobilized Rs 9,800 crore, which has risen to Rs 10,500 crore in 232 listings till January of FY26, he said.
Pandey also noted one instance of an SME raising debt through the stock exchange as a welcome instance.
However, there is a concentration of issuances from the west, with the region accounting for 44 per cent of the IPOs in FY26, Pandey said, stressing on the need for deeper outreach beyond traditional centers to widen the participation of quality SMEs.
"Stock exchanges and industry bodies are already conducting such structured outreach programs on SME listing. However, they need to do more to prepare and attract SMEs to the capital markets," he added.
Sebi's ongoing plans to open offices in state capitals will also help facilitate easier access to information on listing and post-listing processes, he said.
