Listing of Companies on Stock Exchanges

INTRODUCTION:

Listing companies on stock exchanges is a pivotal process enabling them to raise capital from public investors. In India, there are two prominent national level stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Each exchange offers distinct segments or boards tailored to companies of different sizes and stages of growth:

1. Startup Platform: Introduced by BSE in 2018, this platform specifically caters to startups. It aims to facilitate the listing of new-age businesses, thereby promoting their growth and encouraging their significant contribution to the economy. The platform operates with minimal guidelines, providing startups a streamlined pathway to access the capital market.
2. SME (Small and Medium Enterprises) Board: This board serves the needs of Small and Medium Enterprises (SMEs) seeking to list on stock exchanges. It offers a platform for SMEs to raise capital and expand their operations through public investment.
3. Main Board: The Main Board is the primary segment of both BSE and NSE, catering to well-established companies looking to list publicly. It includes large corporations with substantial market presence and significant operational scale.

BSE’s initiative in 2018 underscores its commitment to fostering a conducive environment for startups, offering them opportunities to leverage the capital market effectively. This approach not only supports the growth aspirations of startups but also enhances the overall dynamism and diversity of India’s capital market landscape.

The SME Board is specifically designed to facilitate smaller and growing companies in accessing the capital markets. The aim is to provide a simplified and cost-effective platform for SMEs to raise funds, enhance their visibility, and grow their business.

The Main Board is intended for larger, more established companies that meet stringent regulatory and financial criteria. Listing on the Main Board is often seen as a prestigious milestone, signifying the company’s maturity and stability.

Following are the advantages of listing of companies on SME Board and Main Board:

Advantages of Listing on the SME Board

• Easier Access to Capital due to less stringent requirements for listing
• Increased Visibility and Credibility
• Liquidity for Shareholders
• Potential for Better Valuation
• Operational Improvements

Advantages of Listing on the Main Board

• Large Scale Funding
• Enhanced Market Visibility
• Broad Investor Base
• High Liquidity
• Market Prestige

PREPARATION FOR INITIAL PUBLIC OFFER (IPO)

IPO is a complex process, and its planning commences at least a several months before the issue actually hits the market. A company which intends to get its securities listed with the provisions of the Securities and Exchange Board of India Act, 1992 and the rules and regulations made there under need to plan beforehand should comply with the following conditions.

Sl. No.	Particulars
1.	Finalisation of Issue Structure
2.	Identified Promoters and their shareholding should be minimum 20% of post issue paid up capital for lock-in.
3.	Increase in authorized capital, If Required
4.	Capital Built-up as Required (Fresh Allotment/Transfer)
5.	Conversion of company into Public Limited Company (For conversion required minimum 3 Directors and 7 Shareholders)
6.	Alteration of MOA & AOA
7.	Appointment of Registrar and Transfer Agent (RTA) for ISIN connectivity with NSDL/CDSL, Conversion of Physical shares into Demat and handling IPO process
8.	Board Resolution of Board of Director and shareholder for approval of IPO (After Conversion)
9.	Appointment of Lead Manager and other intermediaries like Market Maker, Underwriter, Legal Advisor, Banker to the issue, Peer Review Auditor etc
10.	Agreement with Lead Manager, RTA, CDSL/NSDL, Underwriter, Market Maker, Banker to the Issue/Sponsor Bank. (After Conversion)
11.	Restated Audited Balance sheet for last 3 complete years and restated upto such latest months so that the period should not be less than 6 months from Issue open date.
12.	Appointment of Company Secretary and Chief Financial Officer
13.	Constitution of Board of Directors containing at least one-Woman Director, one third independent director, Managing Director or whole-time director, Non-Executive Director.
14.	Constitution of several committee such as: Audit Committee (Minimum 3 directors, 2/3 should be Independent) Stakeholder’s Committee (Chairman should be non-Executive) Nomination & Remuneration Committee (Minimum 3 Non-Executive, 2/3 should be Independent) CSR Committee, if applicable (3 Directors, 1 should be independent)
15.	Adoption of different policies such as: Vigil Mechanism Archival policy for any material event / information disclosed to the stock exchanges Code of conduct for directors & senior management personnel Code of practices and procedures for fair disclosure of unpublished price sensitive information (“UPSI”) Familiarization programme for independent directors Policy on criteria for determining materiality of events Nomination and remuneration policy Policy on related party transactions Policy for determining material subsidiary Policy and procedures for inquiry in case of leak of unpublished price sensitive information Salient features – terms and conditions – for the appointment of an independent director of company
16.	Shareholders resolution for borrowing power/investment
17.	Apply to update all the existing Government, Statutory and other approvals in the name of Limited Company
18.	All pre-issue shares should be dematerialized and lock-in for 1 year other than minimum promoters’ contribution which will be lock-in for 3 years.
19.	Creation/updation of website as required for listed company. All the official email id for CS/CFO/MD/Directors/KMP etc. should be linked with website domain name.
20.	Legal opinion report for any outstanding litigation and material development against the Company, Promoters, Directors, Group Companies etc.

LISTING CRITERIA – MAIN BOARD AND SME EXCHANGE

Stock Exchange	Post Paid-up Capital	Track Record	Net-worth	Functional Website	Others
NSE (EMERGE)	Post issue paid up capital not > than 25 Cr.	At least 3 years	Positive Net-worth	√	a. Company Incorporated under Companies Act b. Operating Profit for at-least 2 out of 3 preceding Financial Years c. No Proceedings under IBC d. Not referred to BIFR. e. No Regulatory action in past 3 years f. No winding up petition admitted by NCLT
NSE (MAIN BOARD)	Paid-up Capital of the Company not < 10 Cr and the capitalization of the applicant’s equity shall not be less than 25 crores	At least 3 years	Positive Net-worth (N.A. for Companies with Proposed issue of > Rs 500 Cr	√	a. No winding up petition admitted by NCLT. b. Company not referred to BIFR c. No proceedings under IBC against Company and promoting Companies. d. Arrangement to be made for investor grievance mechanism e. e. Any default in payment of interest/Principal amount to be cleared before making application for listing
BSE (MAIN BOARD)	Minimum post issue paid-up Capital 10 Cr.	N.A.	N.A.	√	Minimum Issue Size: 10 Crores Minimum Market Capitalization  :25 Crores
BSE (SME)	Post issue paid up capital not > than 25 Cr.	At least 3 years. OR funded by Bank/FI/C.G./S. G. or the group Company should be listed for at least 2 years either on Main Board or SME Board	Positive Net-worth	√	a. Company Incorporated under Companies Act b. No change in promoters in previous 1 Year. c. Net Tangible Assets: Rs 1.5 Crore positive cash accruals in any of the year out of last 3 Years.
BSE Startup Platform	Post issue paid up capital not > than 25 Cr.	Minimum 2 years	Positive Net-worth	√	a. Company Incorporated under Companies Act b. No change in promoters in preceding 1 Year. c. registered as start-up with DPIIT or else paid-up Capital should be > 1 crore. d. IT Sector e. not referred to NCLT under IBC f. No winding up petition g. No Promoters debarred by Authority

NUMBER OF COMPANIES LISTED ON INDIAN STOCK EXCHANGES

In the financial year 2023-24, the number of companies listed on both the SME board and the Main board of Indian stock exchanges saw significant increases compared to the previous year.

SME Board:

In FY 2023-24, 200 Small and Medium Enterprises (SMEs) raised a total of ₹5,838 crore through IPOs. This is a substantial increase of 161% compared to ₹2,235 crore raised by 125 SME IPOs in FY 2022-23​.

(Source-Fortune India)

The number of SMEs that made their stock market debut in the first half of 2024 is up 67% from the same period of last year.

Main Board:

On the Main board, 76 companies raised ₹61,915 crore via IPOs in FY 2023-24. This represents a 19% increase from the ₹52,116 crore raised by 37 IPOs in FY 2022-23. Excluding the large LIC IPO in the previous year 2022-23, IPO mobilisation increased by 58%​ from the last fiscal.

(Source-Fortune India)

These figures indicate a robust and expanding IPO market, with a growing number of companies opting for public listings to raise capital, spurred by positive market conditions and strong investor confidence.

HERE ARE SOME OF THE HIGHEST LISTING GAIN IN IPOS IN INDIA:

Main Board

1. Tata Technologies Limited: 162.85%

2. Religare Enterprises Limited: 182.00%

3. Vishal Retail Ltd: 110.00%

4. Aishwarya Telecom Limited: 159.57%

5. Latent View Analytics Limited: 326.49%

SME Board:

1. Kay Cee Energy & Infra Limited

2. Australian Premium Solar (India) Limited

3. Purv Flexipack Limited

4. Rudra Gas Enterprise Limited

5. Owais Metal and Mineral Processing Limited

(Source: https://www.chittorgarh.com/)

The Stock markets have come a long way since the inception of BSE in 1875. Recently, in January 2024, at USD 4.4 trillion, the Indian stock markets surpassed Hong Kong’s market capitalisation and is ranked 4^th in the world.

India has seen a record number of IPOs in the past 3 years, and the current year 2024 may create even higher records in terms of the number of IPOs and the funds raised.  Given the massive surge, it becomes very critical that the interests of retail investors and other stakeholders are safeguarded. The regulator in charge of the capital markets, SEBI has the task of fostering investor confidence, and it has been proactively coming up with various amendments, guidelines and circulars to ensure integrity of markets, creating investor awareness and safeguarding the interest of the investors and all stakeholders.

Conclusion

The process of listing on stock exchanges in India offers companies significant advantages, from easier access to capital to enhanced market visibility and credibility. Whether through the SME Board, the Main Board, or specialized platforms like the BSE Startup Platform, companies can find tailored pathways to meet their growth and capital-raising needs. As the Indian IPO market continues to expand, robust regulatory oversight and proactive measures by SEBI will remain crucial in maintaining investor confidence and market integrity.