SME and MSME are the core to the economic and social development of India. They play a significant role in India’s Industrial growth, providing employment and entrepreneurship opportunities in both urban and rural areas. The government regulators have played a pivotal role in the strengthening of this segment. Since 2012 till date, 256 SME’s have preferred BSE for listing, in their quest of capital formation and wealth creation. BSE is the largest SME exchange in India with an overwhelming number of SME companies deciding to list on BSE. The success of which has been noticed by international agencies such as IOSCO in promoting SME’s in India.
BSE Ltd has set up the BSE SME Platform as per the rules and regulations laid down by SEBI. BSE SME Platform offers an entrepreneur and investor friendly environment, which enables the listing of SMEs from the unorganized sector scattered throughout India, into a regulated and organized sector.
WHY BSE SME ?
The listed SMEs will step into the threshold of BSE SME Platform and foray in to the world of finance for further growth and development. BSE SME will assist these SMEs to raise equity capital for their growth and expansion and thus help them blossom into full fledged companies. In due time enable them to migrate into the Main Board of BSE as per the existing rules and regulations.
BSE SME will provide immense opportunities to the following market participants.
To raise equity capital for growth and expansion of SMEs in a cost effective manner.
Opportunities to identify and invest in good companies at an early stage, long term Capital Gain tax benefit and Exit Route.
Benefits of Listing
- Easy access to Capital
BSE SME provides an avenue to raise capital through equity infusion for growth oriented SME’s.
- Enhanced Visibility and Prestige
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.
- Encourages Growth of SMEs
Equity financing provides growth opportunities like expansion, mergers and acquisitions thus being a cost effective and tax efficient mode.
- Ensures Tax Benefits
In case of listed securities Short Term Gains Tax is 15% and there is absolutely no Long Term Capital Gains Tax.
- Enables Liquidity for Shareholders
Equity financing enables liquidity for shareholders, provides growth opportunities like expansion, mergers and acquisitions, thus being a cost effective and tax efficient mode.
- Equity financing through Venture Capital
Provides an incentive for Venture Capital Funds by creating an Exit Route and thus reducing their lock in period.
- Efficient Risk Distribution
Capital Markets ensure that the capital flows to its best uses and that riskier activities with higher payoffs are funded.
- Employee Incentives
Employee Stock Options ensures stronger employee commitment, participation and recruitment incentive.
Criteria for New Listing
The Company shall be incorporated under the Companies Act, 1956.
- Post Issue Paid up Capital
The post-issue paid up capital of the company shall be at least Rs. 3 crore.
Net worth (excluding revaluation reserves) of at least Rs.3 crore as per the latest audited financial results.
- Net Tangible Assets
At least Rs.3 crore as per the latest audited financial results.
- Track Record
Distributable profits in terms of Section 123 of the Companies Act 2013 for at least two years out of immediately preceding three financial years (each financial year has to be a period of at least 12 months). Extraordinary income will not be considered for the purpose of calculating distributable profits.
- The net worth shall be at least Rs.5 crores.
- 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.
A certificate from the applicant company / promoting companies stating the following
a) ” The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).”
Note: Cases where company is out of BIFR is allowed.
b) There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.
Migration from BSE SME Platform to the Main Board
The companies seeking migration to Main Board of BSE should satisfy the eligibility criteria It is mandatory for the company to be listed and traded on the BSE SME Platform for a minimum period of two years and then they can migrate to the Main Board as per the guidelines specified by SEBI vide their circular dated 18th May 2010 and as per the procedures laid down in the ICDR guidelines Chapter X B.
The 5 P’S of Listing Process on BSE SME
The Issuer Company consults and appoints the Merchant Banker/s in an advisory capacity.
The Merchant Banker prepares the documentation for filing after:
- conducting due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, Government Approvals, Promoter details etc.
- and planning the IPO structure, share issuances, and financial requirements
- Submission of DRHP/Draft Prospectus – These documents are prepared by the Merchant Banker and filed with the Exchange as well as with SEBI as per requirements.
- Verification & Site Visit – BSE verifies the documents and processes the same. A visit to the company’s site shall be undertaken by the Exchange official .The Promoters are called for an interview with the Listing Advisory Committee.
- Approval – BSE issues an In Principle approval on the recommendation of the Committee, provided all the requirements are compiled by the Issuer Company.
Filing of RHP/Prospectus – Merchant Banker files these documents with the ROC indicating the opening and closing date of the issue.
Once approval is received from the ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.
The Initial Public Offer opens and closes as per schedule. After the closure of IPO, the Company submits the documents as per the checklist to the Exchange for finalization of the basis of allotment.
BSE finalizes the basis of allotment and issues the Notice regarding Listing and Trading.
Guidelines for Listing
The post issue face value capital should not exceed Rs. Twenty-five crores.
Trading lot size
- 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.
The existing Members of the Exchange shall be eligible to participate in SME Platform.
The issues shall be 100% underwritten and Merchant Bankers shall underwrite 15% in their own account.