Trends of Equity in the SME Corporate Sector in India: An Empirical Study

Abstract

Trends of equity fund in the SME corporate sector in India: an empirical study is the need of the hour. The small medium manufacturing industries play the most crucial role in the development of the economies of the country. Companies start their journey with equity finance and all the future financing decisions are depending on it. Similarly equity fund is also important for the survival, growth and development of the small medium industries. The small medium industries also plays even greater role in the development of rural economies of the country. In India, it is the second largest employer, after agriculture, and accounts nearly 6 percent of the country’s GDP. Equity finance plays a vital role in this sector as the debt fund is costly and there is lesser interest from the financier to finance the debt requirement. Equity finance is required by all industries whether they are in promotional, operational or expansion stages. Small corporate firms generally use debt funds extensively, as the owner’s fund does not suffice to meet their needs. For growth, modernisation, expansion and diversification purposes, small companies borrow funds from external sources. Equity has played an important role in the Indian corporate sector,more specifically in the small manufacturing industries in the private sector. From both financial and non-financial point of view, equity is advantageous to business concerns. Equity is financially better, because it is cheaper and non-financially it provides flexibility.