Evey small company has dream of
getting listed on stock exchange. But due to eligibility criteria it was not
possible. But now this dream can become true by taking some small steps.
Benefit from getting listed, what are those small steps? what are eligibility criteria? All these
questions will be resolved in this article. BSE and NSE both are leading stock
exchanges of India. And both have a separate platform for SMEs called SME Stock
Exchange. This is dedicated platform for SMEs after few years of getting
listed on this platform and fulfilling other conditions listed SME can switch
to the mainboard of Stock exchange where all the Small Mid cap and Blue-chip
companies listed.
1.
What is SME Stock Exchange?
It is a dedicated stock exchange
and trading platform for SMEs only. In India an SME exchange functions within a
recognized stock exchange or the main exchange such as the BSE Limited and the
National Stock Exchange of India.
2.
Benefit of Listing at SME Stock Exchange:
- Listing
Benefits
-
Easier to List
Min allottees required:
50 only – can be achieved with focused marketing.
Lower cost, time and
effort to get listed.
-
100% underwriting
100% underwriting of the
issue will ensure that the issue is fully subscribed.
-
Alternate Valuation
Potential based
valuations could be offered by Informed investors rather than benchmarking with matured
large Corporates on the main board.`
-
New class of investors
Platform will attract
new class of long term Institutional risk investors (both in primary &
secondary market), interested to invest in exciting fast growing companies in
India on a regulated platform.
-
Migration to main Board on seasoning
Getting listed on SME
Platform will allow companies to grow to serious size, conserve value
and migrate to main board with more broad based IPOs.
- Other
Benefits
There are
many benefits of listing, some
illustrative benefits are as follows:
1.
It will fetch more trust and credibility in the
market, with vendors and employees also.
2. A regulated company create a different picture
psychologically in every ones mind. Whether vendor, Supplier or employees.
3. The SME’s benefit by greater credibility and
enhanced financial status leading to demand in the company’s shares and higher
valuation of the company. Increase in Borrowing power.
4.
Company will get opportunity of merger and
acquisition
5. It will
create a new identification with peer group companies.
6. Equity
financing enables liquidity for shareholders, provides growth opportunities
like expansion, mergers and acquisitions, thus being a cost effective and tax
efficient mode.
7. Employee
Stock Options ensures stronger employee commitment, participation and
recruitment incentive.
- Eligibility
Criteria:
NSE and
BSE SMEs exchange platform both have same criteria to some extend for SME
listing which is as follows :-
a.
Incorporation:
The
Company shall be incorporated under the Companies Act, 1956.
b.
Financials
-
Post Issue Paid up Capital
The post
issue paid up capital of the company (face value) shall not be more than Rs. 25
crores.
-
Net worth
Positive Net
worth.
-
Tangible Asset
Net
Tangible Assets should be Rs 1.5 Crore.
-
Track Record
The
company or the partnership/proprietorship/LLP Firm or the firm which have been
converted into the company should have combined track record of at least 3
years.
Or
In case
it has not completed its operation for three years then the
company/partnership/proprietorship/LLP should have been funded by Banks or
financial institutions or Central or state government or the group company
should be listed for at least two years either on the main board or SME board
of the Exchange.
The
company or the firm or the firm which have been converted into the company
should have combined positive cash accruals (earnings before depreciation and tax)
in any of the year out of last three years and its net worth should be positive.
c.
Other Requirements
It is
mandatory for a company to have a website.
It is
mandatory for the company to facilitate trading in demat securities and enter
into an agreement with both the depositories.
There
should not be any change in the promoters of the company in preceding one year
from date of filing the application to BSE for listing under SME segment.
- Difference
between SME Exchange and mainboard
So
these are the difference between SME and main Board Exchange platform. Where
some reporting requirement, time frame and norms are relaxed for SMEs. And after a time frame when SME is eligible
and fulfil the required criteria for Migrate to main board it will be migrated
on main board.
5.
Statics of SME Exchange:
If we see
the statics, on BSE SME platform around 324 companies successfully listed out
of 380 companies who have applied. And 82 companies migrated to main board.
Around
200 companies listed on NSE SME platform and 22 has been migrated to main
board.
6.
Before listing check list
SME
Exchange provides the right launch pad for companies with strong business
models and high growth potential. However, going public is a paradigm shift for
a private company as it would be required to:
-
Appreciate the need to meet initial and sustained
expectations of external investors
-
Appreciate the need to have a team, organization
structure and internal processes which bring about investor credibility and
capability to efficiently manage the capital market processes and increased
level of scrutiny, reporting, compliances and regulatory obligations;
It is therefore
critical that before considering a public listing, you have realistic awareness
of your current level of preparedness and what needs to be done to become a
successfully listed company
-
Develop an understanding of the capital markets
and the various processes involved in raising funds through an IPO.
-
Weigh the IPO option vis-à-vis other options of
raising funds.
-
Once you choose to opt for the IPO route make a
realistic assessment of your readiness for listing.
- Start upgrading and strengthening your internal
processes and systems to meet the requirements of a publicly listed company.
-
Crystallise your project and capital raising plans.
-
Engage a merchant banker to assist you in the IPO
process.
Reference: www.nseindia.com and www.bsesme.com
Disclaimer: The contents of this
article have been prepared in accordance with the relevant provisions, and
information available at the time of preparation. The views and opinions
expressed in this article are those of the author and the author does not take
any responsibility and cannot guarantee that no inaccuracy occurs.
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