Karnataka offers support to SME units to raise capital through IPOs

Bengaluru: Karnataka Chief Minister Siddaramaiah on Friday announced a support of up to Rs 25 lakh to small and medium enterprises to tap capital markets to raise equity.

The government, the CM said in his budget speech, will bear 50% of the cost SME units would incur on raising capital through an IPO.

The government has capped such subsidies at Rs 25 lakh.


There are about 400 SME units across India that have listed themselves on the national exchanges, but such units from Karnataka are just about a dozen. One of the reasons for this is the huge cost incurred on the listing formalities and other transactions including documentation.

Since the minimum ticket size on the bourses is Rs 4 crore, an SME unit trying to raise capital through an IPO would end up spending up to 20% of it on fee under various heads including merchant banking, marketing, registrar, legal, statutory advertisement, and regulatory charges, MSME director Vijayamahantesh B Danammanavar told ET.

The issue related expenses vary depending on the size of the IPO and the merchant banker.

Under Karnataka’s proposed policy, if an SME unit were to incur Rs 50 lakh in costs, then the government would bear half of it.

Karnataka is following in the footsteps of Maharashtra, Tamil Nadu, Kerala, Gujarat, Himachal Pradesh, Punjab, Uttarakhand, and Haryana.

The scheme is to encourage SME entrepreneurs to explore raising equity capital through an IPO as they traditionally rely on bank loans and other forms of debt, the director said.