Startup
Start Your Business
Private Limited Registration
Public Company Registration
OPC Pvt Ltd Registration
LLP Firm Registration
Section 8 Company Registration
Nidhi Company Registration
Insurance Company Registration
NBFC Company Registration
Producer Company Registration
Foreign Subsidiary Registration
Foreign Branch Office
Foreign Liaison Office
Foreign Project Office
Overseas Company Registration
Proprietorship Firm Registration
Partnership Firm Registration
Grow Your Business
GST Registration
MSME Registration(UDYAM)
Shop & Establishment Registration
Startup India Registration
ESI/PF Registration
IEC Code (Import Export)
Startup Consultation
Appoint Virtual CFO
Angel Funding/ VCs
Virtual Office Service
Due Diligence of Company
Business Development
Protect Your Business
Trademark Registration
Trademark Objection
Trademark Hearing
Trademark Opposition
Trademark Infringement
Trademark Renewal
Trademark Assignment
Trademark Withdrawal
Trademark Monitoring
Logo Design Service
Copyright Registration
Patent Registration
Exit Your Business
Close Company
Fast Track
Close LLP
Close Firm
GST Cancellation
Compliances
Change Services
Change Company Name
Change LLP Name
Change Company Object
Change LLP Object
Increase Authorised Capital
Increase Paid-up Capital
Increase LLP Capital
Transfer of Shares
Alteration in MoA & AoA
Resignation of Auditor
Appointment of Director
Resignation of Director
Change in Designation of Director
Shifting Registered Office of Company
Shifting Registered Office of LLP
Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
Annual Return of Deposits
Half Yearly MSME Return
Statutory Registers & Minutes
XBRL Filing of Companies
eStamping of Share Certificates
Dematerialisation of Shares
RBI FEMA Compliance
GST Returns Filing
ESI-EPF Returns Filing
TDS Returns Filing
Change in Structure
Proprietorship to OPC
OPC to Private Limited
Private Limited to OPC
LLP to Private Limited
Private Limited to LLP
Partnership Firm to LLP
Private Limited to Public Company
Public Company to Private Limited
Trust/Society to Section 8 Company
Existing Company to Section 8
Existing Section 8 to Company
Services
Accounting & Book Keeping
GST Compliance
Valuation Services
Corporate Litigation
Company Law Advisory
Services For Banks
Drafting & Vetting Services
Business Setup Advisory
Startups Funding
Business Loans
Get in Touch
Govt Liaisoning
Retainership Services
NBFC
NBFC Company Registration
NBFC Micro-Finance Registration
NBFC P2P Lending Registration
NBFC Core Investment Company
NBFC ROC Compliance
NBFC RBI Compliance
NBFC License Restoration
NBFC Business Plan
NBFC Acquisition
NBFC Consultancy
NBFC Compliance Calendar
NBFC Independent Director
ISO
ISO 9001:2015
Most Demanded
ISO 14001:2015
ISO 13485:2016
OHSAS 18001:2007
HACCP Certification
CE Marking
GMP Certification
CMMI Level 3 Certification
ISO 22000:2005
ISO 27001:2013
FSSAI
FSSAI Registration
FSSAI State License
FSSAI Central License
FSSAI Registration Renewal
FSSAI License Renewal
FSSAI Returns Filing
FSSAI Compliances
FSSAI Consultancy
ITR
Salaried Person
TDS Refund
Firms/LLPs
Companies
NGOs
Income Tax Notice
Income Tax Planning
Income Tax Litigation
Income Tax Computation
Charity
Section 8 Company
Recommended
Trust Registration
Society Registration
80G & 12A Registration
FCRA Registration
NITI Ayog Registration
CSR-1 Registration
CSR 2 Report
CSR Services
NGO Consultancy
NGO Handholding
Govt Grants Support
Partnership
Angel Investors
Venture Capitalists
Co-Working Spaces
Banks and NBFCs
Incubation Centres
Government Wings
Institutional Bodies
Software Companies
CA/CS/CMA/Lawyers
Press & Media Houses
Overseas Ventures
Other Startup Enablers
Contact Us
Home
Compliance Xero
Fundraising for Small & Medium Companies - What is SME IPO, its Eligibility Criteria & Listing Process in India
Fundraising for Small & Medium Companies - What is SME IPO, its Eligibility Criteria & Listing Process in India
Volume
1
Rate
1
Pitch
1
Fundraising for Small & Medium Companies - What is SME IPO, its Eligibility Criteria & Listing Process in India. Small and Medium enterprises often find it hard to raise capital after they exhaust their private sources or reach the maximum debt limits. Listing on a stock exchange’s exclusive SME portal is a potential solution for funding crunch, offering a host of other advantages. By offering their equity in the form of an Initial Public Offer, small and medium enterprises can access funds from the capital market. In this post, Compliance Calendar delineates the process of listing for small and medium enterprises (SMEs) on recognised stock exchanges in India. Top Reasons for Listing your Small or Medium Business on a Stock Exchange : Easier listing process - With only 50 minimum allottees required, easier terms and conditions, the process of listing your small and medium medium business has been made relatively simple as compared to regular listing on the stock exchange. Guaranteed full subscription - The SEBI regulations require a merchant banker to underwrite 100% of the issue, ensuring that the issue by the SME becomes fully subscribed. Provides a fair valuation to your company - Listing on a stock exchange can provide potential based valuations by informed investors. Access to larger pool of investors and funding - Listing on a recognised stock exchange allows small businesses to access a new class of investors in the primary market, thereby tapping into larger sources of funding. Contributing to India’s growth story - Getting listed allows a small company to spread its wings, grow to a larger size while also conserving value. Their profitability, economic value and services invariably add to India’s growth story for small and medium businesses. Regulations and Regulator for Market Listing of SMEs The market regulator, SEBI in 2010 set up a trading platform specifically for operating as a trading terminal for small and medium enterprises on recognised stock exchanges. For this, Chapter XB was inserted in the SEBI (Issue of Capital and Disclosure Requirements) ICDR Regulations, 2009. What is an SME Exchange? SEBI regulations define an SME Exchange as a trading platform of a recognised stock exchange having nationwide trading terminals, that have been permitted by the Board to list the specified securities and includes a stock exchange granted recognition for this purpose but does not include the Main Board. Both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have SME exchange portals. The SME IPO allows privately owned small and medium enterprises to sell their shares to the public. They do this by getting listed at the BSE SME or the NSE Emerge platform. Applicability of Listing regulations to SMEs Under the Regulation 106M of the ICDR Regulations, two categories of companies can issue specified securities: An issuer whose post-value face value capital is less than10 crores, or An issuer whose post-value face value capital is more than10 crores and upto 25 crores. Eligibility Criteria for SMEs Minimum post issue capital - Companies with a minimum post issue capital of 1 crore and a maximum of 25 crores are eligible for issuing an SME IPO in India. Incorporation - The company must be incorporated under the Companies Act, 2013 or its erstwhile predecessor, the Companies Act, 1956. Track record - The SME should have a track record of minimum of three years if it was formed by converting partnership or proprietorship or LLP firm. Underwriting - The issue shall be 100% underwritten and the merchant bankers shall underwrite 15% on their own account. Minimum application size - The minimum application and trading lot size shall not be less than1 lac per application. Minimum allotment - No allotment shall be made if the number of prospective allottees is less than 50. Other criteria required The SME should have a valid website. The SME is required to enter into a contract with the depositories and also undertake to agree to issuing shares in dematerialised forms. The company's promoters must remain the same for at least one year after filing the IPO. Additional criteria specified by BSE for listing on its SME Exchange Net worth of at least1 crore for proceeding two full financial years Net tangible assets of at least 3 crores in the last financial year The track record of the applicant company seeking listing should be at least three years, including operations for at least 1 year and audited financial results for 1 full financial year. The company should have operating profit for at least two out of the preceding three financial years. The leverage ratio should not be more than 3:1, however some relaxations are permitted for finance companies There must be no pending default in payment of interest, interest or principal amounts by the company, promoters, and subsidiary companies. Emerge Platform for SME listing by NSE The National Stock Exchange operates its SME listing portal called Emerge. The Emerge Platform specifies the following criterion for listing SMEs : The issuing company should be incorporated under the companies act 1956 or the 2013 act The post paid of capital should not be more than than 25 crores Track record of at least 3 years is required The company should not be undergoing any insolvency or winding up proceedings under any court or tribunal. The following disclosures are also required in the offer document by Emerge, NSE: Material regulatory or disciplinary action by a stock exchange or regulatory authority in the last one year against promoters, group companies of the applicant company Default in respect of payment of interest, principal to debenture bond, FD holders, banks, et cetera, by the applicant or promoters Litigation record, nature of litigation and status of litigation of any pending matters involving the applicant, promoters, promoting companies and group companies The status of any criminal cases filed or investigation being undertaken by any of its directors. Listing Process for Small and Medium Companies on Stock Exchanges in India Planning stage - Appointing Intermediaries In this stage, the issuing SME appoints merchant bankers in an advisory capacity. The company should also appoint underwriters. The underwriters are responsible for drafting IPO related documents, fixing selling price of the shares and agreeing to buy shares in case of a shortfall in meeting minimum purchase requirements. Under Regulation 106O, the issuer making a public issue of specified securities can file a copy of the offer document with SEBI through a merchant banker. This can be done simultaneously while filing a prospectus with the SME exchange. Preparatory stage - Due Diligence, Documentation and structuring the IPO In this stage, the intermediary appointed conducts the due diligence for the company, such as matching details in financial documents and verifying information. Underwriting requirement As per Regulation 106P, the entire issue made by SME has to be 100% underwritten. In addition to this, the merchant bankers have to underwrite at least 15% of the issue size on their own account. The issuing company has to appoint underwriters in accordance with Securities and Exchange Board of India (Underwriters) Regulations, 1993 and the merchant banker may enter into an agreement with nominated investor indicating therein the number of specified securities which they agree to subscribe at issue price in case of under-subscription. The underwriting document must also be disclosed in the offer document. Merchant bankers are also required to file an undertaking with SEBI that the issue is 100% underwritten, along with the list of underwriters and nominated investors indicating the extent of underwriting or subscription commitment. If other underwriters fail to fulfil their underwriting obligations or other nominated investors fail to subscribe to unsubscribed portions, the merchant banker shall fulfil the underwriting obligations. Application stage The first step in the application procedure is to submit the draft Red Herring Prospectus (DRHP) or the draft prospectus to SEBI. The offer document is also required to be displayed on the websites of SEBI, the issuer SME, the merchant banker and the SME exchange where specified securities are to be listed. Undertaking from the Merchant Banker that all the changes have been incorporated in the RHP as confirmed at the time of DRHP (along with detailed Comparison) is to be submitted. Review stage After submission of the draft prospectus with Sebi, SEBI reviews the prospectus to ensure compliance with its internal regulations. In the meanwhile, BSE/NSE also verify the documents and process the same. The exchange officials may also visit the company premises and promoters may be called for an interview with the listing advisory committee. On the basis of this committee’s recommendation, an in-principle approval may be given to the issuing company. Filing of Red Herring Prospectus/Prospectus The Merchant Banker files these documents with the Registrar of Companies (ROC)indicating the opening and closing dates of the issue. On approval from the ROC, the merchant bankers intimate the exchange about the opening dates. Process flow of various stages in the listing process for SMEs Company files Draft Red Herring Prospectus/ Draft Prospectus with the Stock Exchange Exchange uploads the draft prospectus on the Website of the Exchange Company has to file an application on NEAPS (NSE Electronic Application Processing System) or BEFS (BSE Electronic Filing System) and attach the relevant documents as per the Checklist specified by the Exchange Exchange does preliminary check & verifies the application and seeks replies to queries ( if any) Exchange issues in-principle approval to the Company Company has an intention to open the Issue, within 12 months, post Exchange approval in case of SME Issue One day prior, to the issue open, the company has to submit the 1% security deposit to Designated Stock Exchange (DSE) One day prior, to the issue open, the company allocates the shares to the Anchor investor (if any) Issue can be open for minimum of 3 days and maximum of 10 days Issue Close (T Day – Working day) On T+1 working day the Company submits the documents as per the checklist of the Exchange On T+1 working day basis of allotment is carried out at DSE On T+2 working day, the company submits the Listing Documents to the Exchange. On T+2 working day company submit Credit Confirmation from the Depository i.e. dematerialised shares to the allottee’s account & Exchange will issue a circular to the Market for listing of shares with effect from T+3 working day On T+3 working day Company gets listed on the Exchange Public Offering The IPO opens and closes as per the schedule detailed. Once the IPO closes, the company submits documents as per the checklist to the Exchange for finalisation on the basis of the allotment. Post Listing The stock exchange finalises the basis of the allotment and issued notice regarding trading and listing. Compliances Required Form A and Form H by Merchant Bankers The merchant banker submits a due diligence certificate as per Form A of Schedule VI (Format of Due Diligence Certificate), including additional confirmations as required under Form H of Schedule VI along with offer documents. Checklist of Documents required to be submitted to the Stock Exchanges Listing Agreement, duly executed on non- judicial stamp paper of Rs.100/- Resolution passed by the Board of Directors for allotment of securities. Shareholding pattern of Issuer (preissue, issue and post issue) in format given as per Regulation 31 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Post issue shareholding pattern in PDF form without PAN All Advertisements published relating to IPO Confirmation from the Issuer and Confirmation from the Merchant Banker(s) List - of allottees for all categories (in excel format) Lock-in confirmation from Depository/RTA Confirmation from Statutory Auditors/ Practicing Chartered Accountant/ Practicing Company Secretary Initial Listing Fees and Annual Listing Fees as applicable plus taxes How can retail investors purchase equity in small and medium? Retail investors can apply for SME IPO in India by submitting an online application from their stock, broker, agent, bank or third-party applications. Brokers now offer UPI based online IPO applications and banks offer both UPI as well as ASBA IPO applications. Migration from the SME exchange to the Main Board Exchange As of Dec 6, 2023, as per the BSE SME platform data, out of 467 listed companies, 181 have migrated to the mainboard exchange. When the paid up capital of the listed SME exceeds 10 crores but is less than 25 crores, the company can opt for voluntary migration from the specific SME exchange to being listed on the main board of the stock exchanges. If the post-issue paid-up capital exceeds 25 crores, it is mandatory for the SME to shift to the main board exchange. Migration from the SME platform to the main board requires certain prerequisites, such as - Completing a minimum of 3 years of listing on the SME exchange\minimum net worth of 15 crores Market capitalisation of at least 25 crores Positive EBITDA in any two out of three financial years The SME should also have a minimum of 250 public shareholders and promoters should hold at least 20% equity share capital. It's crucial for SMEs to ensure compliance with all regulatory requirements throughout the IPO listing process in India to maintain transparency and investor confidence. Connect with our experienced legal and stock market professionals at Compliance Calendar to navigate through the complexities of your SME’s IPO process effectively.
Share this article:
Search more articles:
You may also like
LLP Annual Compliance and Turnover Limit For Audit
RBI FEMA/ FDI Reporting: EMF SMF Filing, FC-TRS and FLA Return
OPC Annual Compliance and Exemption
XBRL Filing of Companies: Know Applicability, Exemption and List of XBRL Softwares
Annual Compliance Checklist of Nidhi Company: Post Incorporation Compliance
Name Change of Company: Checklist and Procedures Under Companies Act, 2013
Shifting of Registered Office from One State/UT to Another State/UT Under Companies Act, 2013
Section 8 Company Annual Compliance: Know Some Key Features of Section 8 and FAQs
DPT-3: Return of Deposits, Due Date, Compliance Checklist, Procedure and FAQs
Conversion of OPC into Private Limited: Law, Compliance Checklist and Stepwise Procedure
Compliance of Transfer and Transmission of Shares
Complete Procedure of Dematerialisation of Shares Under Companies Act, 2013
Compliance of Statutory Register and Minutes Under Companies Act, 2013
Alteration of MOA & AOA: The Companies Act, 2013
Charge Creation, Modification and Satisfaction Under Companies Act, 2013
Increasing Role of Legal Compliance in Business
What You Need to Know about Banking Compliance
Different Compliance Requirements By One Person Company (OPC) in India
Why are Small Businesses struggling to cope with GST Compliance?
Types of GST in India- What is CGST, SGST and IGST
Compliances under Companies Act in case of Foreign Directors on Board
First Year ROC Annual Compliance for Private Limited Company
Applicability of FLA Returns under FEMA Laws in India
How to close a Company in Fast Track Exit Mode by STK-2?
How to increase Authorised Share Capital of Company by filing SH-7?
FEMA/ RBI Compliance Checklist for Indian Companies with FDI
ESOPs Compliance Checklist and Procedure under the Companies Act, 2013
Why do investors prefer CCPS over other instruments available?
RBI Mandatory Compliances for setting up a Wholly Owned Subsidiary (WOS) / Subsidiary Company in India
ESOPs: A Powerful Incentive for Employee Retention and Business Growth
Post Incorporation Compliance of Private Limited Companies
C-PACE: Fast Track Company Strike Off- A Better Choice than leaving company non-compliant
PAS-6: Half Yearly Return (How to dematerialize the securities)
Sweat Equity Share: Compliance and Procedure under the Companies Act, 2013
Why Unlimited Public Company needs to convert their shares in Demat Form and required to file PAS-6?
Keeping Books of Account and Papers at Address other than Registered office | AOC-5
Unlocking Growth and Retaining Talent: The Power of ESOPs for Startups
Tracing the Path: Enhancing Transparency, Financial Control, and Risk Management through Audit Trails
Shares Certificates and Stamp Duty Payment in India
Startup Funding and ESOPs: Employee Stock Options for Growth
MGT-1: Compliance on Distinctive Number of Shares & Updation
Exemption in Compliances to Private Companies - Jun 5, 2015
Annual Compliance Calendar for your LLP Firm Business
Right Issue of Shares- Section 62 of Companies Act, 2013
Compounding Procedures for Form FC-GPR Violations under FEMA
Masking Email Address Of Companies/ LLPs on MCA Master Data V3
Process of Compulsory Dematerialisation (Demat) of Shares
Types of AIF Registration: Regulatory Compliance from SEBI Perspective
Issue of Overseas Convertible Securities - Process, Procedure and Compliance
Mandatory conversion of Physical Shares into Demat - Private Company, WOS and Subsidiary Company
All About ODI and its Compliance for Investments in Foreign Companies
Application for Removal of Auditors from his/their Office Before Expiry of Term
Start Your Business
Private Limited Registration
Public Company Registration
OPC Pvt Ltd Registration
LLP Firm Registration
Section 8 Company Registration
Nidhi Company Registration
Insurance Company Registration
NBFC Company Registration
Producer Company Registration
Foreign Subsidiary Registration
Foreign Branch Office
Foreign Liaison Office
Foreign Project Office
Overseas Company Registration
Proprietorship Firm Registration
Partnership Firm Registration
Grow Your Business
GST Registration
MSME Registration(UDYAM)
Shop & Establishment Registration
Startup India Registration
ESI/PF Registration
IEC Code (Import Export)
Startup Consultation
Appoint Virtual CFO
Angel Funding/ VCs
Virtual Office Service
Due Diligence of Company
Business Development
Protect Your Business
Trademark Registration
Trademark Objection
Trademark Hearing
Trademark Opposition
Trademark Infringement
Trademark Renewal
Trademark Assignment
Trademark Withdrawal
Trademark Monitoring
Logo Design Service
Copyright Registration
Patent Registration
Exit Your Business
Close Company
Fast Track
Close LLP
Close Firm
GST Cancellation
Change Services
Change Company Name
Change LLP Name
Change Company Object
Change LLP Object
Increase Authorised Capital
Increase Paid-up Capital
Increase LLP Capital
Transfer of Shares
Alteration in MoA & AoA
Resignation of Auditor
Appointment of Director
Resignation of Director
Change in Designation of Director
Shifting Registered Office of Company
Shifting Registered Office of LLP
Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
Annual Return of Deposits
Half Yearly MSME Return
Statutory Registers & Minutes
XBRL Filing of Companies
eStamping of Share Certificates
Dematerialisation of Shares
RBI FEMA Compliance
GST Returns Filing
ESI-EPF Returns Filing
TDS Returns Filing
Change in Structure
Proprietorship to OPC
OPC to Private Limited
Private Limited to OPC
LLP to Private Limited
Private Limited to LLP
Partnership Firm to LLP
Private Limited to Public Company
Public Company to Private Limited
Trust/Society to Section 8 Company
Existing Company to Section 8
Existing Section 8 to Company
Services
Accounting & Book Keeping
GST Compliance
Valuation Services
Corporate Litigation
Company Law Advisory
Services For Banks
Drafting & Vetting Services
Startups Funding
Business Loans
Get in Touch
NBFC
NBFC Company Registration
NBFC Micro-Finance Registration
NBFC P2P Lending Registration
NBFC Core Investment Company
NBFC ROC Compliance
NBFC RBI Compliance
NBFC License Restoration
NBFC Business Plan
NBFC Acquisition
NBFC Consultancy
NBFC Compliance Calendar
NBFC Independent Director
ISO
ISO 9001:2015
ISO 14001:2015
ISO 13485:2016
OHSAS 18001:2007
HACCP Certification
CE Marking
GMP Certification
CMMI Level 3 Certification
ISO 22000:2005
ISO 27001:2013
FSSAI
FSSAI Registration
FSSAI State License
FSSAI Central License
FSSAI Registration Renewal
FSSAI License Renewal
FSSAI Returns Filing
FSSAI Compliances
FSSAI Consultancy
ITR
Salaried Person
Firms/LLPs
Companies
NGOs
Income Tax Notice
Income Tax Planning
Income Tax Litigation
Charity
Section 8 Company
Trust Registration
Society Registration
80G & 12A Registration
FCRA Registration
NITI Ayog Registration
CSR-1 Registration
CSR 2 Report
CSR Services
NGO Consultancy
NGO Handholding
Govt Grants Support
Partnership
Angel Investors
Venture Capitalists
Co-Working Spaces
Banks and NBFCs
Incubation Centres
Government Wings
Institutional Bodies
Software Companies
CA/CS/CMA/Lawyers
Press & Media Houses
Overseas Ventures
Other Startup Enablers
Contact Us