SME Listing
Contributed by: Kanikka P Indi
Email id: Kanikka@simplybiz.in
Small Medium Exchange (SME) Listing exchange is a stock exchange platform dedicated for trading the shares of Small & Medium Enterprises (SMEs) who, otherwise, find it difficult for themselves to get listed in the main exchanges.
1. SME (Small and Medium Enterprises) Meaning:
- Micro Enterprise – are those with Investment in Plant & Machinery or Equipment – Not more than 1 Crore Annual Turnover Not more than 5 Crore
- Small Enterprise – Investment in Plant & Machinery or Equipment – Not more than 10 Crore Annual Turnover – Not more than 50 Crore
- Medium Enterprise – Investment in Plant & Machinery or Equipment – Not more than 20 Crore Annual Turnover – Not more than 100 Crore
2. Applicability
A Company can issue specified securities by Small and Medium Enterprises if:
- The post-issue face value capital does not exceed INR.10 Crore.
- The post-issue face value capital is more than INR.10 crore and up to INR. 25 Crore.
3. Minimum Application Value & No. of Allottees
- The minimum application size shall not be less than INR. 1 Lakh per application.
- The minimum number of prospective allottees should not be less than 50.
4. How to Get Ready for SME Listing?
Get a complete review of:
- Business of the Company, future growth potential, position of the Company in the peer group.
- Infrastructure available with the Company i.e. office, information technology, business information systems, assets, plants and machinery.
- Develop internal controls with soundness in reporting methodologies and solidify accounting controls.
- Alignment of books of accounts with the accounting policies.
- Revenue projections and monitoring the targets.
- Building a strong internal and external advisors’ team to guide you through the process and identifying the best team for managing the IPO.
| S.No | Eligibility Criteria | BSE SME Requirement | NSE Emerge Requirement |
| 1. | Post Issue Capital (Face Value) | Maximum : INR. 25 Crores | Maximum: INR. 25 Crores |
| 2. | Track Record | Company/Partnership Firm/LLP/Proprietorship (if converted) shall have combined track record of 3 years. Where the applicant company does not have a track record of 3 years, then the Project for which IPO is being proposed should be appraised and funded by NABARD, SIDBI, Banks (other than co-operative banks), Financial Institutions or Combined Positive cash Accruals (earnings before depreciation and tax) in any of the year out of the last three years. | Track record of at least three years of either: i. the applicant seeking listing; or ii. promoters/promoting company iii. Proprietary firm /Partnership firm and subsequently converted into a Company |
| 3. | Net Worth | Atleast INR. 1 Crore for 2 preceding full financial years. | It should be positive. |
| 4. | Earnings before Interest, Depreciation and tax | The company/ proprietorship concern/ registered firm/ LLP should have operating profit (earnings before interest, depreciation and tax) from operations for 2 out of 3 latest financial years preceding the application date *Provided the Company should have operating profit (earnings before interest, depreciation and tax) from operations for one full financial year preceding the application date. | The company/entity should have operating profit (earnings before interest, depreciation and tax) from operations for at least any 2 out of 3 financial years preceding application and its net-worth should be positive |
| 5. | Leverage Ratio | Leverage ratio of not more than 3:1. Relaxation may be granted to finance companies. | No such criteria |
| 6. | Disciplinary Action | No regulatory action of suspension of trading against the promoter(s) or companies promoted by the promoters by any stock Exchange having nationwide trading terminals. The Promoter(s) or directors shall not be promoter(s) or directors (other than independent directors) of compulsory delisted companies by the Exchange and the applicability of consequences of compulsory delisting is attracted or companies that are suspended from trading on account of non-compliance. Director should not be disqualified/ debarred by any of the Regulatory Authority. | The Company should disclose if any disciplinary action by Stock Exchange or regulatory authority is taken in the past one year in Respect of promoters/ promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies). 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. |
| 7. | Default | No pending defaults in respect of payment of interest and/or principal to the debenture/ bond/ fixed deposit holders by the applicant company, promoters/ promoting company(ies), Subsidiary Companies. | Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders, banks, Financial Institutions by the applicant, promoters /promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) during the past three years. |
| 8. | Name Change | In case of name change within the last one year, at least 50% of the revenue calculated on a restated and consolidated basis for the preceding 1 full financial year has been earned by it from the activity indicated by its new name. | No such condition |
| 9. | Other Listing Conditions |
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6. IPO Process
a) Pre IPO-Process
- Appointment of Merchant Bankers (Category I) registered with SEBI to act as Lead Manager to the Issue and Underwriters.
- Appointment of Legal Advisors
- Increase authorised share capital (based on the desired IPO size) , if required
- Audited restated financials for the last 5 years by a peer-reviewed auditor (Financials shall not be older than 6 months at the time of submission of Offer Document with stock exchange/SEBI)
b) Due Diligence
For understanding the business model, business profile and business activities carried out by the Company, Due Diligence of the same is carried out which might also include Site Visit.
c) Offer Document Preparation
- No draft offer document needs to be submitted to SEBI.
- But the offer document has to be filed with SEBI through Merchant Banker, simultaneously with the filing of the prospectus with the SME exchange and the Registrar of Companies or letter of offer with the SME exchange.
- No Observations should be issued on the offer document.
- The offer document shall be displayed from the date of filing, on the websites of SEBI, the issuer, Merchant Banker and the SME Exchange.
d) Appointment of Other Intermediaries
Appointment of Depositories, Registrar to Issue, Market Makers Bankers to Issue, Printers and Advertising Agency.
e) Submission of Documents & IPO Process
Submission of Material Documents, dematerializing of shares, Filing of Offer Document and obtaining In- Principle Approval from Stock Exchange.
7. Conclusion:
SMEs have proved to be the backbone of the Indian economy and play a significant role in generating employment and aids in development of rural areas through setting up of industries. Thus, SME Exchange platforms help immensely in raising funds from capital markets for such enterprises in a systematic and an organized manner.
If you are looking for compliance support, we can help you with the same. SimplyCorp is a solution that offers comprehensive and end-end management of Corporate Governance & Secretarial Compliances covering all stages of entity life cycle. If want to know more on the compliance requirements and outsource the same to us, please write to our Product Head – Vaishali Vohra at the mail vaishali@simplybiz.inor SimplyCorp@simplyBiz.in.
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