How to List on BSE SME Exchange – Listing Requirements –
SMEs play a pivotal role in India industrial and economic growth. The SME infrastructure allows employment and entrepreneurship across India. Due to a comparatively small size, SMEs finds it difficult to get listed in the main board of stock exchange. SME exchange is a trading platform meant for the trading of shares of small and medium scale enterprises. It is an initiative by stock exchanges under the regulations of SEBI.
SMEs need this exchange to raise funds for growth and expansion. As the capital size increases, the enterprises can get listed to the main board of stock exchanges. It also provides excellent opportunities for investors to identify and invest in growing industries and companies.
SME IPO is a process to raise funds for the company’s required current capital, repayment debt, and many other things. Companies who wish to get listed in SME exchange need to come up with an IPO.
Few points to be noted:
- An SME IPO must be 100% guaranteed.
- The application site should not be less than RS 100,000 in the case of SME IPO.
- The minimum number of allottees for an SME IPO is 50.
- In the case of an SME IPO, the lot size remains constant throughout the trading process, which applies to futures trading as well. For example, if an investor is bidding shares for a particular SME IPO of 1500 shares initially, then the investor can only buy or sell the shares in the same lot size.
Criteria for companies to get listed on the SME board:
- The company must be a limited firm.
- The company should have a website.
- The net worth of the company should be positive.
- It should have a net worth of a minimum Rs 3 crores.
- The value of the paid-up capital of the company should be within the range of Rs 1 crore to Rs 25 crores. The companies having capital paid- up value more than Rs 25 crores, will be listed in the main board of stock exchanges.
- The company must have a consistent track record of profitability. It requires showing the records of the last two years out of the past three immediate years.
- The company should not be involved in any legal proceedings.
- The company must mandatorily enable trading in DEMAT securities and pass into an agreement with both Depositories, i.e. National Securities Depository Ltd. and Central Depository Services Ltd.
- The company should not replace the promoters in the previous one year (valid from the date of filing its application for listing in exchange.)
- The company should not be referred to the Board for Industrial and Financial Reconstruction (BIFR).
Companies satisfying the above criteria are eligible for listing on SME exchange through IPO.
Process for the preparation of SME IPO:
- Selection of merchant banker – The aspiring Company must consult and appoint a Merchant Banker in an advisory capacity.
- Restructuring of funds by evaluating market conditions.
- Due diligence and compiling all the required documents, to apply for listing on board..
- Application to the exchanges to get listed.
- Marketing strategy of the company for future proceedings.
- Effective communication between the investors and the company.
- Copies of the draft offer document (10 nos.).
- Soft copy of the Prospectus to upload on the website.
- Copy of resolution approved by the Board of Directors for the issue of securities.
- Copy of the shareholders resolution falling under 62(1)(c) of Companies Act, 2013.
- Certificate from the Managing Director / Company Secretary or PCS / Statutory or Independent Auditors in a prescribed format.
- Copy of all show-cause notice(s)/order(s) (if any) issued by any regulatory authority (e.g. SEBI, RBI, Stock Exchange, etc.) & Correspondence there too.
- PAN & TAN details of the Company.
- DIN & PAN of all Promoters and Directors.
- Printed Balance Sheets, Profit & Loss Accounts and Cash Flow Statements for the preceding applicable years.
- Copies of all significant orders/contracts/ received/ executed/ in-hand should be kept ready and made available for inspection. The Company should also mention the place, time and date where these documents can be inspected.
- A legal statement containing particulars of the dates of, and parties to all the material contracts
- Details of application of the Company/Group Company for the listing of any securities have been rejected earlier by SEBI or by any stock exchange and reasons thereof. If any.
- Name of the exchange which is proposed to be nominated exchange for the issue, if decided.
- Copies of all agreements and memoranda of understanding between the Company and its promoters/ directors.
- Articles & MoA of the company.
- A certificate from the statutory auditor/CA for the compliance of conditions of Corporate Governance.
- Association, if any, of the directors/ promoters of the Company with any public or rights issue made during the preceding period.
- One Time Listing Fees of Rs. 50,000/- plus applicable Service Tax.
- Date of opening of the public issue to be informed as soon as it is finalized.