IPOS

BSE SME

How to List on BSE SME Exchange – Listing Requirements

The BSE SME Exchange has been setup by the Bombay Stock Exchange (BSE) to provide Small and Medium Sized Enterprises (SMEs) a platform for raising equity capital for their growth and expansion. SMEs are the backbone of a nation’s economy and Indian SMEs provide employment to 70 million people through 30 million enterprises. In 2010, The Prime Minister’s Task Force recommended the setting up of a dedicated Stock Exchange for SMEs and SEBI also laid down the regulations for the governance of a SME Exchange. Based on the above, the BSE SME Exchange was established to provide opportunity to Entrepreneurs to raise equity capital for the growth and expansion of SMEs. In this article, we look at how to list on the BSE SME Exchange with listing requirements.tor.

BSE SME Exchange – Listing Requirements

The following are the listing requirements for the BSE SME Exchange:

  1. The SME must be a Limited Company.
  2. The issuer or SME must have a post-issue face value capital of Rs.1 crore to Rs.25 crores. Entities having a post-issue face value of over Rs.25 crores has to be necessarily listing on the Main Board of the BSE.
  3. Net Tangible Assets of the SME must be atleast Rs.1 crore, as per latest audited financial results.
  4. Net Worth (excluding revaluation reserve) must be atleast Rs.1 crore as per the latest audited financial statements.
  5. The company must have a track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for atleast two out of the immediately preceding three financial years. Otherwise, networth must be atleast Rs. 3 crores.
  6. The company must mandatorily facilitate trading in DEMAT securities and enter into agreement with both Depositories, namely, Central Depository Services Limited and National Securities Depository Limited.
  7. The company must have a website.
  8. The company should not have any reference before the Board for Industrial and Financial Reconstruction (BIFR).
  9. The company should not have any winding up petition that has been accepted by a Court.
  10. The issue must be a 100% underwritten issue. Merchant Banker must underwrite 15% on their own accounts.
  11. The Merchant Banker to the issue is responsible for market making for a minimum of three years through a stock broker who is registered as market maker with the SME Exchange.
  12. The company must have a minimum of 50 investors while listing through IPO.

Procedure for Listing on the BSE SME Exchange

Listing on BSE SME Exchange

Step 1: Appointment of Merchant Banker

The issuer Company must consult and appoint a Merchant Banker in an advisory capacity for the listing on the BSE SME exchange.

Step 2: Due Diligence and Documentation

The Merchant Banker would then conduct a due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, Government Approvals, Promoter details etc. and prepare documentation for the IPO. Planning and documentation by the Merchant Banker must include IPO structure, share issuances and financial requirements

Step 3: Application to BSE SME Exchange

Once the due-diligence and documentation is completed by the Merchant Banker, the draft prospectus and DRHP is submitted to the Exchange as per SEBI requirements.

After submission of the required application and documents to BSE, BSE verifies the documents and processes the same. A visit to the company’s site is also undertaken by the BSE Exchange Officials. Post site visit, the Promoters are called for an interview with the Listing Advisory Committee.

On satisfactory completion of the site visit and interview by BSE officials, BSE issues an in-principle approval on the recommendation of the Committee, provided all the requirements are compiled by the issuer Company. On obtaining in-principle approval, the Merchant Banker would file the Prospectus with the ROC indicating the opening and closing date of the issue. On obtaining approval from ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.

Step 4: Initial Public Offering (IPO)

The Initial Public Offer (IPO) opens and closes as per schedule. After the closure of IPO, the company submits the documents as per the checklist to the BSE SME Exchange for finalization of the basis of allotment. On completion of the allotment, BSE issues the notice regarding listing and trading.

Trading on the BSE SME Exchange

After listing on the BSE SME exchange, existing members of the Exchange are eligible to participate in SME Platform and trade on the share of the SME. However, trading on the SME exchange is constrained by the following trading lot sizes:

  • The minimum application and trading lot size shall not be less than Rs. 1,00,000/-
  • The minimum depth shall be Rs 1,00,000/- and at any point of time it shall not be less than Rs 1,00,000/-
  • The investors holding with less than Rs 1,00,000/- shall be allowed to offer their holding to the Market Maker in one lot.
  • However in functionality the market lot will be subject to revival after a stipulated time.

Documents Required for Listing on the BSE SME Exchange

A. Along with the application for using the name of the Exchange in the offer document, the following documents/information shall to be filed by the Company with the Exchange:

  1. 10 copies of the draft offer document.
  2. Soft copy of the Prospectus for uploading on website
  3. Copy of resolution passed by the Board of Directors for issue of securities
  4. Copy of the shareholders resolution under 62(1)(c) of Companies Act, 2013
  5. Certificate from the Managing Director / Company Secretary or PCS / Statutory or Independent Auditors stating the following:
    1. The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).
    2. There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.
    3. There has been no change in the promoter/s of the Company in the preceding one year from date of filing application to BSE for listing on SME segment.
  6. Copy of all show cause notice(s)/order(s) issued by any regulatory authority (e.g. SEBI, ROC, RBI, CLB, Stock Exchange etc.) & Correspondence there to.
  7. PAN & TAN of the Company.
  8. DIN & PAN of Promoters and Directors.
  9. Printed Balance Sheets, Profit & Loss Accounts and Cash Flow Statements for the preceding 5 years (or for such applicable periods)
  10. Copies of major orders/contracts/ received/ executed/ in-hand should be kept ready and be available for inspection. A statement of material contracts duly certified by a practicing Chartered Accountant/ practicing Company Secretary should be submitted. The Company should also state the place, time and date where these documents can be inspected
  11. A statement containing particulars of the dates of, and parties to all the material contracts, agreements (including agreement for technical advice and collaboration), concessions and similar other documents (except those entered into in the ordinary course of business carried on or intended to be carried on by the company) together with a brief description of the terms, subject matter and general nature of the documents.
  12. Details if the present or any previous application of the Company/Group Company for listing of any securities has been rejected earlier by SEBI or by any stock exchange and reasons thereof.
  13. Name of the exchange which is proposed to be designated Exchange for the issue, if decided.
  14. Copies of agreements and memoranda of understanding between the Company and its promoters/ directors.
  15. Articles & Memorandum of Association of the Company.
  16. A certificate from the statutory auditor/practicing chartered accountant certifying compliance of conditions of Corporate Governance as stipulated in clause 52 of the listing agreement and circular no.SEBI/CFD/DIL/CG/1/2004/12/10 dated October 29, 2004 issued by the Securities and Exchange Board of India (SEBI). The company should also give the composition of various committees as required under the said clause.
  17. Association, if any, of the directors/ promoters of the Company with any public or rights issue made during the preceding 10 years.
  18. One Time Listing Fees of Rs. 50,000/- plus applicable Service Tax.(Details of all applicable fees for SME Listing is attached)
  19. Date of opening of public issue to be intimated as soon as it is finalized.

NSE SME

How To List On NSE SME Exchange – Listing Requirements

The Issuers on SME platform shall have adhered to conditions precedent to listing as emerging, inter-alia, from

Securities Contracts (Regulations) Act 1956,

Companies Act 1956,

Securities and Exchange Board of India Act 1992,

Any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

Eligibility criteria for listing on NSE Emerge Platform

The following criteria should be complied with as on the date of filing the Public Offer Document with NSE as well as when the same is filed with RoC and SEBI.

Any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.

INCORPORATION

The Issuer should be a company incorporated under the Companies Act 1956 / 2013 in India.

POST ISSUE PAID UP CAPITAL

The post issue paid up capital of the company (face value) shall not be more than Rs. 25 crore.

TRACK RECORD

Track record of atleast three years of either

  1. the applicant seeking listing; or
  2. the promoters****/promoting company, incorporated in or outside India or
  3. Proprietary / Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing.
****Promoters mean one or more persons with minimum 3 years of experience in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally

The company/entity should have operating profit (earnings before interest, depreciation and tax) from operations for atleast any 2 out of 3 financial years preceding the application and its net-worth should be positive.

OTHER LISTING CONDITIONS

The applicant company has not been referred to erstwhile Board for Industrial and Financial Reconstruction (BIFR) or No proceedings have been admitted under Insolvency and Bankruptcy Code against the issuer and Promoting companies

The company has not received any winding up petition admitted by a NCLT / Court.

No material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company.

DISCLOSURES

The following matters should be disclosed in the offer document:

Any material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year in respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company.

Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders, banks, FIs by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) during the past three years.

The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation, and status of litigation.

In respect of the track record of the directors, the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences.

Listing Requirements and Process

SME Procedure

An issuer, whose post issue face value capital is upto twenty five crore rupees is eligible to get its securities listed on the SME platform. An Issuer has to take various steps prior to making an application for listing its securities on the SME Platform of the Exchange. These steps are essential to ensure the compliance of certain requirements by the Issuer before listing its securities on the Exchange. The various steps to be taken include:

The Issuer shall file the draft prospectus along with the documents mentioned in the checklist for IPO Vetting. The draft prospectus should have been prepared in accordance with the SEBI (ICDR) Regulations, other statutes, notifications, circulars, etc. governing preparation and issue of prospectus prevailing at the relevant time. The Issuers may particularly bear in mind the provisions of Companies Act, Securities Contracts (Regulation) Act, the SEBI Act and the relevant subordinate legislations thereto. NSE will peruse the draft prospectus only from the point of view of checking whether the draft prospectus is in accordance with the listing requirements, and therefore any approval given by NSE in respect of the draft prospectus should not be construed as approval under any laws, rules, notifications, circulars, guidelines etc.

Issuers desiring to list on the NSE pursuant to IPO shall make application for admission of their securities to dealings on the NSE in the forms prescribed in this regard as per details given hereunder or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof.