SME IPO/ Stock Exchange Listing

Small & Medium Businesses generate about 35% of the GDP of India and account 40% of exports. With more graduates and professional looking towards becoming entrepreneurs and expand existing businesses, Funds are the greatest limitations stopping these talented group of people from reaching the next level. With the opening up of Capital Markets to SME's, a new avenue has been opened for enterprises that are running high on debt to expand their capital base and reduce finance cost. This also leads to building a credible image before customers and liquidity and credibility for investors. Now SME's are going to be Big!!!

SEBI has drafted listing agreement for SME's and given approval to BSE and NSE to setup dedicated platform for SME's. SEBI has also relaxed the requirements for listing in SME Stock Exchange. Going for initial public offering (IPO) is ultimate dream for every business; Professionals like Chartered Accountants are well experienced for ensuring smooth transition and advising on financial matters.

Our services to SME's going for IPO/ listing in Stock Exchange

  • Chartered Accountant services
  • Due diligence for:
    • Regulatory compliance
    • Indian GAAP and IFRS compliance
  • Advisory service:
    • Devising efficient capital structure
    • Business and share valuation
    • Preparation of Project Reports
    • Profiling business promoters and management
  • Enterprise Risk Management
  • Certification of restated financial statements
  • Auditing of financial statements
  • Company Secretary Services
    • Listing agreement compliance
    • Brokers Audit
    • Securities Audit
    • Advising on corporate restructuring

FAQ

Companies / Firms can go for SME IPO who are looking to raise funds by diluting their control to a small extent. Basic requirement would be:

  • Strong and Dynamic top management.
  • Good track record of past performance.
  • Group of talent people to carry the expectation and sustain.
  • Long term plans displaying need of expansion and market stability

The company which intends to go for SME IPO or list in SME stock exchange has to complete following procedures.

  • Prepare annual reports and get it audited.
  • Create a website of the company, if not available.
  • Convert private limited to public limited company.
  • Appoint a full time Company Secretary.
  • Appoint reputed CA firm to conduct peer review of audit of last year & restate the accounts for last 5 years.
  • Detailed disclosure on:
    • Past performance of the company
    • Operation of business of company
    • Risk factors involved in running business.
    • Pending litigation against company, its magnitude & ramification.
    • Promoters & management.
    • Material contracts & agreements.
  • Prepare project report with details of income & expenses for at least 3 years.
  • Due diligence has to be performed on:
    • Regulatory compliance followed by the company.
    • Legal compliance necessary for company through a reputed legal firm.
  • Appointment of Independent director.

Procedure for Listing

  • Increase Authorized Capital
  • Identification & Selection of following Parties
    • Merchant banker
    • Investors
    • Registrars & Transfer Agents
    • Advertising Agents
    • Underwriters
  • Hosting Code of Conduct on company website
  • Appoint a full time Company Secretary.
  • Constitute following Committees – Audit, Share holder, Grievance, Remuneration etc.,

    Agreement with NSDL &CDSL & Obtaining ISIN (International Security Identification Number)

  • Filing Red Herring Prospectus (RHP) with Stock Exchange & SEBI & application for In-principle approval from stock exchange.
  • Filing RHP with ROC & Obtaining clearance
  • In case of IPO, issue shares and close and list in the Stock exchange or company can also directly list in Stock Exchange with group of informed investors
  • Filing trading application with Stock Exchange

Difference between SME Platform & Main board

SME Main Board
1 Capital Requirement Min - 1crore / Max - 25crore Min - 10crore / Max – No limit
2 Trace Period of Profit Not Mandatory Mandatory 3 out of 5 years with last year showing profits.
3 Underwriting 100% Not Mandatory
4 Market making 3 years completion Not Mandatory
5 Period 2-4 months 8-10 months
6 SEBI Approval Waived Mandatory
7 Min Investors 50 1000
8 Lot size for trading Rs.100000 1 Nos
9 Return of Financial Half year Quarterly
10 Annual Report Abridged version is alright & full report can be put on website. Full report to be sent

Plat form Available in India

BSE has launched BSE SME to enable SME listing and NSE has launched NSE Emerge.

Cost Saving (in INR)

SME Main Board Savings
1 SEBI Approval - Min 25,000 25,000
2 Approval for stock exchange - Min 50,000 50,000
3 Listing fee 50,000 20,000 (30,000)
4 Annual fee 25,000 Min 80,000 55,000
Total 75,000 175,000 100,000

Benefits of SME Listing is

  • Better visibility of company as it forms part of analysts review & the image of company is raised in eye of suppliers, customers and investors.
  • Raise much wanted funds for expansion.
  • Reduce the debt liabilities and reduces the finance cost thereby improving the balance sheet of the company.
  • Companies can any time raise funds through CDR, Preference share etc.,
  • Improve Liquidity of shares in the company shall attract more investors as they can exit easily.

Major Challenges are

  • Merchant Bankers are the most important part of the success of SME listing. Since 100% underwriting is essential, convincing merchant banks will be most crucial and toughest part.
  • As merchant banks charge hefty amounts for market making hence the cost of raising capital increases.

To learn more view video