Under the umbrella of the Pakistan Stock Exchange (PSX), the Growth Enterprise Market (GEM) board provides a platform for small and medium enterprises (SMEs) and emerging corporations to acquire financing to support growth and expansion.
According to a WealthPK’s report, November 2019, the Securities and Exchange Commission of Pakistan (SECP) approved the listing requirements of the GEM Board, making it simpler for SMEs, greenfield projects, digital start-ups, and other firms to list on the Stock Exchange and access financing, WealthPK reported.
The GEM rules and regulations were intended to assist small investors wishing to get funds from the capital markets but were unable to fulfil the strict standards for listing on the PSX Main Board. As a result, the GEM has acted as a secondary board for the listing and trading of equity securities at the PSX, in addition to the Main Board.
Nevertheless, the trading displays on both boards will be similar.
The GEM Board provides a more favourable regulatory environment than the Main Board. Any public limited company which has audited its financial statements for the last two financial years and has a post-issue value of at least Rs25 million is eligible for GEM listing.
The minimum listing fee of the GEM Board is Rs50,000, which is much cheaper than the minimum listing fee of PSX Main Board of Rs200,000.
In addition, anyone licensed by the SECP as a securities broker or issuer’s adviser can act as an advisor to assist issuers.
The issuer may offer only 10% of the paid-up capital of the post issue to eligible investors through an information memorandum. Non-profit organizations and greenfield initiatives are also allowed by the board to raise funds, WealthPK reported.
In late November and early December 2021, two companies – Pak Agro Packaging Limited (PAPL) and Universal Network Systems Limited (UNS) – were listed on the GEM Board, marking a landmark for the PSX.
One of the main advantages of listing on the GEM Board is that the companies will earn a tax benefit of 20% on taxes due in the first and second years of listing, and 10% on taxes due in the third and fourth years of listing, respectively. A company’s financial gain from listing on PSX might be considerable.
Another advantage of listing a company is that it simplifies the question of legacy or succession, as the processes for a smooth transfer of management duties are defined in advance. In family-owned industries and corporations, the transfer of management rights is usually not clearly defined, resulting in a lot of conflict and unhappiness among the future generations vying for control of the organization.
This may be prevented by sticking to the listing’s guidelines and limits, WealthPK reported.
Last but not least, such organizations may be able to attract and retain the best human resources from the country’s talent pool, since people want to work for a company with a good reputation.
A country’s economy depends on growth firms.
They provide a significant number of jobs and contribute significantly to a country’s GDP. It is not just the role of the government to generate jobs, but also that of the private sector. Companies that successfully engage in R&D, create supply chains, grow their market outreach and penetration, improve their infrastructure, and increase their manufacturing capacity, among other things. They also raise the value of their goods and services in order to export them.
This is one of the reasons why the Pakistan Stock Exchange has formed the GEM Board since it not only helps such enterprises expand, diversify, and raise capital, but also helps the country’s capital market flourish, which is vital for developing trade, commerce, and industry. This GEM Board will encourage investors to invest in companies that are strong, expanding, and lucrative. Growth companies afford an opportunity to profit from their growth.
Investors put their money into these businesses in the hope of generating a profit and/or collecting dividends, while the businesses get the much-needed capital. In other words, this activity completes a crucial portion of the economic cycle by providing the investors with opportunities for investment and to develop their businesses.
INP/AJ/LK
