SME LISTING

INVESTMENT OPPORTUNITIES IN EMERGING COMPANIES

 SME EXCHANGES – AN OVERVIEW
 An SME Exchange is a stock exchange dedicated for trading the shares / securities of
SMEs who otherwise find it difficult to get listed on the Main Board.

 Recommended by Prime Minister’s Task Force in Jan 2010

“SME Exchange“ and other regulations are defined under Chapter XA / XB of SEBI
(ICDR) Regulations

 SEBI has issued a final circular on May 18, 2010 for setting up a stock exchange/ a
trading platform by a recognized Stock Exchange having nationwide trading terminals
for SME.

 BSE launches its first SME exchange in March 2012.

 Necessary amendments have been made in the various regulations.

 Model equity listing agreement has been prepared and notified.

 BSE launched a SME-Exchange for small and medium enterprises.

 NSE launched EMERGE September 2012

Number of companies listed so far on BSE & NSE is 300
and above.

Total funds raised by companies – 2500.00 Crores and

above

Total Market Capitalisation-25000.00 Crores and above

Number of companies migrated to main board on both

the exchanges – 50 and above
Financial Benefits:
 Improved Credit rating which results into the interest cost saving,

 Facilitates technology tie ups, joint ventures,

 Scope for additional loans are available as RBI has permitted the pledging of the
shares of the listed company as collateral,
 Accelerate company’s growth & Market capitalization

 Gujarat government offers the subsidy to upto 5 lakhs for SME listings

Valuation Benefits:
 The regulations permit the migration of the company from SME board to the main
board after 2 years from the SME’s listing
 Listed companies enjoy greater PE Ratio as compared to unlisted companies

 Liquidity and trading volume in listed companies increases

Taxation Benefits:
 LTCG is exempted for the listed companies while in unlisted companies LTCG is
levied 20%
 STCG is 15% for listed companies while in unlisted companies it is 30%
Regulatory benefits:
 Half Yearly compliances for SME’s

 No need to publish the financial results in news papers for SME’s

 SEBI approval is not required to get listed as SME

 Equal benefits will be available for SME’s as Main board

Other Benefits:
 Enhance creditability of the company into the known once

 Brand building & visibility through display

 Expansion of investor base

 Increased participation by venture capital players

 Capital Market allows distribution of risk efficiently by transferring risk to

those who are best able to bear it.
An Overview of Key Requirements &
Eligibility Norms

SEBI

BSE

NSE
 CRITERIA’S
Post Issue Paid Up Capital
Net worth
Minimum net tangible assets
Other listing requirements
Track record
BSE-SME NSE-EMERGE
The post issue paid up capital of the
The post-issue paid up capital of the
company (face value) shall not be
company shall be at least Rs. 3 crore.
more than Rs. 25 crore.
Net worth of at least Rs.3 crore It should be positive
At least Rs.3 crore as per the latest Positive cash accruals before EBDT
from operations for at least 2 financial
audited financial results.
years preceding the application
• Company has not been referred to
Board for Industrial and Financial
• A company should have a website
Reconstruction
• A company facilitate trading in demat
• No petition for winding up is admitted
securities
by a Court
• No change in the promoters of the
• No material regulatory or disciplinary
company in preceding one year from
action by a stock exchange or
date of filing the application to BSE
regulatory authority in the past three
years against the applicant company
• Distributable profits for at least two
years out of immediately preceding
three financial years (each financial • Track record of at least 3 years of
year has to be a period of at least 12 either applicant or promoters or
months). partnership firm converted into a
Or private limited
• The net worth shall be at least Rs.5
crore
 SEBI NORMS FOR LISTING
Companies listed on the SME platform exempted from IPO / FPO eligibility norms
prescribed in ICDR Guidelines

Offer document to be filed with SEBI & SEs, no observations to be issued by SEBI
on the offer document filed by Merchant Bankers

Minimum IPO application size & trading lot of Rs 1 lakh

Minimum 50 investors required for the IPO

Listing is linked with the face value of paid up capital post IPO

Up to Rs.10 crores – SME Platform;

Between 10 – 25 crores – Optional to issuer on SME or Main platform

Beyond 25 crores – Compulsory on the Main platform

Suitable provisions are made for migration to / from main board

Minimum 2 years of satisfactory track record to be maintained

Preparation and declaration of Financial results on a half yearly basis for SMEs,
instead of quarterly basis
 BSE SME VS MAIN BOARD
Parameters Main Board SME Exchange
Post – issue paid up Min INR 3 crore; Max INR 25
Min INR 10 crore
capital crore

Minimum Allotees in IPO 1000 50

Non Mandatory Mandatory

IPO underwriting (Under 50% compulsory subscription (100% underwritten with MB
to QIB’s) underwriting 15%)

IPO Grading Mandatory Not mandatory

Track record Stringent track record norms Relaxed track record norms

Offer Document vetting By SEBI By Exchange

IPO Application Size INR 10000 – INR 15000 Min. INR 1 lac

IPO Time frame 6 months 2 – 3 Months

Reporting Requirements Quarterly Half yearly

 NATIONAL STOCK EXCHANGE
Listing Fees structure Amount ( )
Processing Fees 25,000
Initial Listing Fees 25,000
Annual Listing Fees (based on paid up capital)
Upto 5 Crore 10,000
Above 5 Crore and upto 10 Crores 15,000
Above 10 Crore and upto 20 Crores 25,000
Above 20 Crore and upto 25 Crores 45,000

BOMBAY STOCK EXCHANGE

Listing Fees structure Amount ( )
One-time Listing Fees 20,000

Annual Listing Fees (based on paid up capital)

Annual Fees is 25,000 or 0.01% full market capitalization 25,000 or

whichever is higher. 0.01%
PRE-IPO PREPRATIONS, APPROVAL OF STOCK FILING OF FINAL
ISSUE STRUCTURING & EXCHANGE /FILLING OF PROSPECTUS WITH S/E
DUE DELIGENCE PROSPECTUS WITH ROC AND SEBI

CONVERSION INTO A
PREPRATION OF DRAFT
PUBLIC LIMITED ROC APPROVAL AND ISSUE
PROSPECTUS AND FILLING
COMPANY. COMPANY OPENING, SUBSCRIPTION
OF DRAFT PROSPECTUS
DEMATERIALISATION OF AND ISSUE CLOSING
WITH S/E
SHARES

COMPLIANCE OF LISTING OF SHARES,

APPOINTMENT OF CORPORATE GOVERNANCE TRADING APPROVAL &
INTERMEDIARIES REQUIREMENTS NOC MARKET MAKING
FROM BANKS/LENDERS
 SEBI
SME REGISTRAR
STOCK OF
EXCHANGE COMPANIES

UNDERW INITIAL MARKET

PUBLIC
RITER/
MERCHAN MAKER

OFFER
T BANKER

LEGAL REGISTRAR
TO THE
ADVISOR ISSUE
TO THE
PEER
ISSUE REVIEW
AUDITOR
AND
COMPANY
SECRETARY
The following are the roles, obligations and responsibilities that are required to be carried
out by the Market Maker.
The Market Maker shall be required to provide a 2-way quote for 75% of the time in a day.
The minimum depth of the quote shall be Rs.1,00,000/-. However, the investors with
holdings of value less than Rs 1,00,000 shall be allowed to offer their holding to the Market
Maker in that scrip provided that he sells his entire holding in that scrip in one lot along with
a declaration to the effect to the selling broker.
Execution of the order at the quoted price and quantity must be guaranteed by the Market
Maker, for the quotes given by him.
There would not be more than five Market Makers per scrip.
The Market Maker may compete with other Market Makers for better quotes to the
investors.
The Market Maker has to start providing quotes from the day of the listing / the day for the
respective scrip and shall be subject to the guidelines laid down for market making by the
exchange.
The Market Maker has to act in that capacity for a period of three years.
 Valuation on basis of
0.1
Thousands
0.08
Axis Title

0.06

0.04

0.02

0
Universal Autofoundry Limited
Original BV 27.65
Current MV 64
Current Mkt cap 51.9
 CHETAN PATEL & ASSOCIATES
Contact Details:
301, Akshar Stadia, Opp. Symphony House, B/H Armieda Cosmetic Center, Off S.G.
Highway, Thaltej, Ahmedabad-54
E - Mail ID: chetanpatelcs@gmail.com