One revisits good schemes introduced some time back and forgotten due to a sudden change of fortune in the economy, temporarily. Let me enthuse you with some gems under the aegis of NSE, a world-famous investment platform to benefit all investment-related stakeholders. Let me introduce you to NSE – Emerge which is a credible and efficient market place to bring about the convergence of sophisticated investors and emerging corporates in the country. It is a platform for the best of emerging corporate to raise capital from Institutional investors and HNI. With the gloom spread by all involved in various media, let us learn about this market place to maximize your investment.
Web site to learn the basic tenets:
https://archives.nseindia.com/emerge/sme_brochure.pdf
I shall present it in the form of Questions and Answers for quenching our intellectual thirst.
Can we have details of the market place and its success?
The past performance speaks.
EMERGE: STATISTICS (*as on 31st December 2019)
Particulars* Statistics
No. of companies Listed 206
Market Cap Rs. 12107.12 Cr
Total Capital Raised Rs 3203.75 Cr.
Now that one knows of thousands of Crores of investment input, it is comforting to know its details.
Let me call it as the preamble. How NSE-SME platform help me?
“NSE’s SME platform “EMERGE”, offers emerging businesses a new and viable option for raising equity capital from a diversified set of investors in an efficient manner. These companies have the potential to unlock value and emerge on a bigger stage. EMERGE can play a critical role in significantly improving access to risk capital for emerging companies. At the same time, this platform will provide investors with exciting opportunities to invest in promising SME’s / technology Startups.”
Emerge eligibility criteria
It should be an SME company with the following characteristics.
Post issue paid-up capital (face value) up to Rs.25 crore
- Track record of at least 3 years
- Positive net worth
- Positive cash accruals from operations for 2 years.
Benefits
- Higher visibility and profile
- Higher credibility with stakeholders like customers, vendors, employees, etc.
- Alternate asset class for investors
- Unlock the value of ESOPs to attract and retain talent
- Alternate valuations: Liquidity /exit for investors
- Migration to Main Board
In the case of technology startups, * can we have more information?
(*Technology startups working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property such as but not limited to Information technology, Data analytics, Bio-technology, Nano-technology, E-commerce, Genetic Engineering, Space Technology, 3D Printing, Artificial intelligence, Robotics, etc.)
Any startup can look at the above details to know its class and if necessary, get in touch with NSE, addresses available at reference below.
Technology start-ups
Post issue paid-up capital (face value) up to Rs.25 crore
- Track record of at least 3 years
- Positive net- worth
- Annual Revenue: Not less than 10 Cr
- Annual Growth: 20% (Number of Users/Revenue Growth/Customer base)
Is there any condition on share-holding?
- At least 10 % Pre – Issue Capital as on the date of filing of draft offer document held by:
> Qualified Institutional Buyer(s) (QIB)
OR
> A member of the angel investor network or Private Equity Firms
» Such an angel investor network or Private Equity should have had an Investment in the startup ecosystem Investment in 25 or more startups and aggregate investment is more than 50 crores.
Someone may ask why NSE-EMERGE?
- Credible admission process
- State-of-the-art trading system
- High-quality investor information
- SME Mentoring
Let me admit that unless a state-of-art trading system with a credible admission process is available, more investments with reliable sources would not be forthcoming.
The whole atmosphere speaks of start-ups with the best inclination, trustworthy performance, and risk-taking capabilities. Hence the stringent conditions for shareholding and other requirements.
If I am a shareholder or investor for new SMEs, how do I get benefits?
Indian SMEs represent a diverse asset class of emerging companies from both traditional sectors and new age economy sectors like IT, ITES, organized retailing, education, entertainment, media, etc. representing the new and modern face of Indian companies scaled up their businesses rapidly providing high returns to the early-stage investors. Yes, initial risk perception is part of SME culture.
They have also demonstrated impressive management bandwidth by successfully managing high growth, cross border operations, and complex inorganic transactions.
Emerge will be an ideal platform for growing companies wishing to raise capital for, Capex, working capital, acquisitions, R&D, marketing or any other Bonafede growth requirement.
Who are the likely EMERGE asset class?
Very interesting and reliable information to pallet the senses is given below:
Companies with high growth potential
- Diverse profiles
- Diverse business stages
- Diverse sectors
Subsidiary Companies
Large corporates can unlock the value of their subsidiary companies.
Companies funded by VC firms and angel investors
Seeking next round of funding and/or exit too early investors
Project SPVs
Can attract long term investors in a regulated environment
Let give the regulatory framework of EMERGE.
Post-issue paid-up-capital (Face Value) – Not mandatory, less than Rs.25 crore
Minimum number of allottees in the IPO- 50
Observations on DRHP: By the Exchange, 100% underwritten (15% on the books of the merchant banker)
Market capitalization / Issue size: Half-yearly
Reporting requirements (Audited a/c): Mandatory
Corporate government requirements: Same as a mainboard.
Merchant Bankers play a very important role in the IPO process of EMERGE and also have a role in the Post listing phase. Their responsibilities are higher on the EMERGE platform as in addition to the conventional role of managing and underwriting the IPO, they are also responsible for ensuring the market for a period of three years from the IPO. One can choose any one of the existing registered merchant bankers with SEBI to manage issues of SME Platform.
Please remember that typing-up with a merchant banker of an appropriate profile is important for the long- term success of the IPO.
Let us discuss the admission process.
Credible admission process
- Transparent, credible, and efficient admission process
- Strong emphasis on corporate governance of the issuers
- High-quality disclosures from issuers
How about the post listing framework?
Let me enlist its characteristics.
Proper emphasis on credible reporting on end-use of proceeds is made.
Also, faster dissemination of information to investors is ensured.
Let us get enlightened about the robust trading platform.
EMERGE will have alternative trading options for the listed scrips. Depending upon the expected liquidity and trading interest levels, the SME securities could trade either on the continuous market (similar to the mainboard) or have daily liquidity windows through call auctions, which will help aggregate liquidity and control volatility in the SME stocks.
Further, we learn from the web site that a robust platform has been developed to provide users with an efficient trading experience. The SME securities will be traded on the same NEAT terminals as the Main Board scrips, with a unique code SM to differentiate them. Similarly, market maker quotes will also have a distinct symbol.
What about market makers?
EMERGE will have market makers with two- way eligible quotes (of minimum depth & within the stipulated Bid offer spread) in each trading session.
The minimum presence would be 75% in each session. This will result in liquidity & better price discovery for all for 3 years post listing through a credible market-making mechanism The market maker will also monitor the scrip trading and report anomalies to the Exchange for appropriate intervention.
Let us note the important following point:
All existing members of the exchange are eligible to act as market makers for the SME issuers provided, they qualify the Exchange criterion and have completed the registration process. I am sure the existing members of the exchange will hasten the process.
How about SME education and hand-holding?
For promoters to learn:
A brief workshop, of the capital markets and its processes for the SME promoters to make them aware of the Capital market as an opportunity to raise capital, SME exchange guidelines, IPO & listing Processes, etc.
For the compliance officer of the SME and would-be investors of the company:
A tailor-made certification module to ensure that the compliance officer/ CFO of the issuer is well versed with pre/post-listing regulatory processes and compliance obligations of a listed company. This voluntary certification program will provide confidence to both promoters and investors in the companies. This module will test the seriousness of the official concerned so that the whole operation takes place seamlessly.
Now that enough information has been given in clear terms, it is time to get started for listing.
- Develop an understanding of the capital markets and the various processes involved in raising funds through an IPO.
- Weigh the IPO option vis-à-vis other options of raising funds.
- Once you choose to opt for the IPO route make a realistic assessment of your readiness for listing.
- Start upgrading and strengthening your internal processes and systems to meet the requirements of a publicly listed company.
- Crystallize your project and capital raising plans.
- Engage a merchant banker to assist you in the IPO process.
Conclusion
Most of the startups have encountered enormous problems in everything except in enthusiasm or in knowledge which prompted them to venture into the field. However, unlike the earlier times, the phenomenal growth shown by these start-ups have forced governments, big companies, or other stakeholders to take a serious note of their position and performance. Right from buying a pan to a car or any other commercial venture, this segment has started unnerving established players. This bullet point article is intended to be read at leisure and each subject can be grasped at convenience but the ultimate purpose will be served only when the start-up ventures out for market for investors seeking and converts its talent into market capitalization by enlisting in a market place like SME EMERGE.
I envy the facilities available to a youngster in a hand-holding manner to float a company, dream big, perform, and get capitalized for further growth. The investment will not be a constraint. I also appreciate NSE for making the information as pleasure-seeking exercise and not a moment unexcited.
CONTACT: For more information, visit www.nseindia.com/emerge email: [email protected] Twitter – https://twitter.com/NSE_EmergeITP Facebook – https://www.facebook.com/EmergeITP.
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Disclaimer : After hearing about the success stories of many SMEs, I think it is proper to learn about NSE EMERGE and inform young entrepreneurs. The ideas given are my collected ones and purely personal and anyone serious to know must approach proper officials of NSE for guidance. Neither NSE nor taxguru.in is responsible for my views.
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