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 the 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.

 

Below, we look at how to list on the BSE SME Exchange with listing requirements.

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 at least 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 at least two out of the immediately preceding three financial years. Otherwise, net worth 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. Nanocap / Microcap Ventures works with multiple Underwriters and Merchant Bankers that are associated with the BSE SME Exchange.

  11. The Merchant Banker 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 the BSE SME Exchange involves five different steps, namely:

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.

Mr. Steve Muehler

Founder & Managing Member

Private Placement Markets

101 California Street

San Francisco, CA 94111

Email: Steve@PPMSecurities.com

Phone: (877) 259-8066

  • Steve Muehler LinkedIn
  • Steve Muehler Facebook
  • Steve Muehler Twitter
  • Steve Muehler Website
  • Steve Muehler Blog

Private Placement Markets, LLC (a Delaware Limited Liability Company) provides no depository services and is not insured by the FDIC. Private Placement Markets is an Investment Banking Industry Document Preparation Company and Capital Markets Advisor. Private Placement Markets does not offer, and does not offer to provide any broker dealer or market maker services. Private Placement Markets operates this website (referred to as the “Website”). By accessing this Website and any pages thereof, you agree to be bound by its Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. Private Placement Markets does not provide financial planning services. Private Placement Markets does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.

 

© 2019 by Private Placement Markets, LLC & Steve Muehler