Introduction:
In the diverse tapestry of the business ecosystem, Small and Medium Enterprises (SMEs) play a pivotal role, acting as a key driving force behind economic development and job creation. To foster growth and enhance their operations, many SMEs aspire to list on recognized stock exchanges. Such listing helps them raise capital for expansion, increase their credibility, and gain visibility in the broader market. This article delves into the detailed criteria and procedure for SMEs looking to list on the Bombay Stock Exchange (BSE) – one of India’s premier trading platforms.
Detailed Analysis:
The eligibility and procedure for an SME listing on the BSE are multi-faceted and encompass various financial requirements, operational mandates, and requisite disclosures:
Financial Requirements:
The financial eligibility criteria for SMEs seeking to list on the BSE establish several benchmarks that these enterprises need to meet:
1. The post-issue paid-up capital of the company (face value) should not exceed Rs. 25 crores.
2. The company needs to have a positive net worth.
3. The net tangible assets of the company should be at least Rs 1.5 crore.
4. The company, partnership firm, or LLP that has been converted into a company should possess a combined track record of at least three years. If the company hasn’t been operational for three years, it should have received funding from banks, financial institutions, or central or state government, or the group company should have been listed for at least two years on the main board or SME board of the BSE.
5. The company should have had combined positive cash accruals (earnings before depreciation and tax) in any of the years out of the last three years, and its net worth should be positive.
Other Requirements:
Apart from the financial criteria, several operational requirements must also be met:
1. The company should have an operational website.
2. The company should facilitate trading in dematerialized securities and enter into an agreement with both depositories.
3. The promoters of the company should have remained unchanged in the preceding year from the date of filing the application to BSE for listing under the SME segment.
Disclosures:
The companies are expected to provide the following disclosures:
1. A certification stating that the company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR). However, companies that have exited from BIFR are allowed.
2. A confirmation that there is no winding-up petition against the company that has been admitted by the court, and no liquidator has been appointed.
Listing Procedure:
The listing procedure on the BSE SME platform involves a series of steps:
Planning: The Issuer Company consults and appoints the Merchant Banker(s) in an advisory capacity. This is the stage where the listing strategy is devised.
Preparation: The Merchant Banker undertakes due diligence on the company, checking all necessary documentation, planning the IPO structure, share issuances, and financial requirements.
Process: During this phase, the application procedure gets underway, which includes submission of DRHP/Draft Prospectus, verification, site visits, and obtaining approval from the BSE.
Public Offering: Upon receiving approval, the IPO is launched and closed as per schedule. The company then submits necessary documents to the BSE for finalizing the basis of allotment.
Post Listing: The BSE finalizes the basis of allotment and issues a notice regarding listing and trading, marking the beginning of the company’s journey as a publicly-traded entity.
Conclusion:
Listing an SME on the BSE is a process that involves meeting specific financial benchmarks, fulfilling operational requirements, and making necessary disclosures. Despite the detailed procedure, the potential benefits of market visibility, stakeholder trust, and access to capital for business expansion make it an attractive proposition for burgeoning SMEs. Understanding the criteria and the process for listing is the crucial first step towards unlocking these benefits. A comprehensive appreciation of these processes allows for a smoother listing journey, paving the way for an SME’s successful future growth.
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