Listing of Small and Medium Enterprise on SME Exchange

SME means Small and Medium Enterprise under section 7 of the ‘Micro, Small and Medium Enterprises Development Act, 2006’ which classifies micro, small and medium enterprises into the following:

• A micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
• A small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
• A medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees. 

SME Exchange provides a great opportunity to small and medium enterprises to raise equity capital for the growth and expansion of their business. SME exchange is a stock exchange for trading the shares of small and medium enterprises who otherwise would find it difficult and costly to get listed in the main board of a recognised stock exchange.

“SME exchange” means a trading platform of a recognised stock exchange having nationwide trading terminals permitted by SEBI to list the specified securities issued in accordance with Chapter IX of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and includes a stock exchange granted recognition for this purpose but does not include the Main Board. Currently there are 2 stock exchanges providing SME exchange in the country, they are:

• NSE’s SME Exchange i.e., NSE EMERGE.
• BSE’s SME Exchange i.e., BSE SME.

ENTITIES NOT ELIGIBLE TO MAKE AN INITIAL PUBLIC OFFER

An issuer shall not be eligible to make an initial public offer:

1. If the issuer, any of its promoters, promoter group or directors or selling shareholders are debarred from accessing the capital market by the Board;

2. If any of the promoters or directors of the issuer is a promoter or director of any other company which is debarred from accessing the capital market by the Board;

3. If the issuer or any of its promoters or directors is a wilful defaulter.

4. If any of its promoters or directors is a fugitive economic offender.

COMPLIANCE REQUIREMENT FOR LISTING IN SME EXCHANGE

• Any company can list its shares under SME exchange if its post issue face value capital does not exceed 25 crores.
• Company should have its net worth in Positive.
• The company or the partnership/proprietorship/LLP Firm or the firm which have been converted into the company should have combined track record of at least 3 years.
• The minimum application and trading lot size shall not be less than 1,00,000/-.
• The issues shall be 100% underwritten and Merchant Bankers shall underwrite 15% in their own account.

BENEFITS OF LISTING UNDER SME BOARD 

• Higher visibility and profile.
• Higher credibility with stakeholders like customers, vendors, employees, etc.
• Equity financing provides growth opportunities like expansion, mergers and acquisitions thus being a cost effective and tax efficient mode.
• Higher valuation of the company.

MIGRATION FROM MAIN BOARD TO SME EXCHANGE

A listed issuer whose post-issue face value capital is less than Rs. 25 crore rupees may migrate its securities to SME exchange:

• If its shareholders approve such migration by passing a special resolution through postal ballot to this effect; and
• If such issuer fulfils the eligibility criteria for listing laid down by the SME exchange

MIGRATION FROM SME EXCHANGE TO MAIN BOARD 

An issuer whose securities are listed on a SME Exchange and whose post issue face value capital is more than Rs. 10 crore rupees and up to Rs. 25 crore rupees, may migrate:

• Its specified securities to Main Board if its shareholders approve such migration by passing a special resolution through postal ballot to this effect; and
• If such issuer fulfils the eligibility criteria for listing laid down by the Main Board.

POST LISTING COMPLIANCE UNDER SEBI(LODR) REGULATION, 2015 

1. Regulation 33: Financial Results: -The listed entity shall submit financial results to the stock exchange within forty-five days of end of each half year as compared to quarterly submission prescribed for companies listed on Main Board of the Exchanges.

2. Regulation 47: Advertisements in Newspapers: – The requirements of this regulation shall not be applicable in case of listed entities which have listed their specified securities on SME Exchange.

3. Regulation 31: Holding of specified securities and shareholding pattern: – The listed entities which have listed their specified securities on SME Exchange shall submit to the stock exchange(s) a statement showing holding of securities and shareholding pattern separately for each class of securities on a half yearly basis within twenty-one days from the end of each half year as compared to quarterly submission prescribed for companies listed on Main Board of the Exchanges.

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This Article is written by Anupam Tripathi & Associates for the purpose of education & comment for more u can connect us at#8800839633 or [email protected]