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.
SME Exchange is growing at a very fast pace which can be seen from the data available with the BSE SME website which states that there currently around 336 companies which have listed their share on SME Exchange with a total market capital of Rs. 27,318.64 Crore till date. Additionally, Rs. 3,492.54 Crore have been raised via various means on the BSE SME Exchange till date.
BENEFITS OF LISTING UNDER SME BOARD
- Higher visibility and Recognition.
- 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.
- Enables Liquidity for Shareholders.
PROCEDURE FOR LISTING IN SME EXCHANGE
1. Appointment of Intermediaries – This stage includes appointment of various intermediaries required for listing under SME Exchange such as Merchant Bankers registered with SEBI to act as Lead Manager to the Issue, Underwriters and Legal Advisors.
2. Pre- IPO Stage- This refers to the procedural aspects for listing under SME Exchange which includes Increase of Authorised Share Capital, passing of resolution for further issue of share capital under section 62(1)(c) of the Companies Act, 2013, Re-Structuring of Boarde., Appointment of Directors to satisfy the conditions prescribed under the Companies Act as well as the SEBI Regulations.
3. Preparation Stage – This stage includes conducting of Due diligence by the Lead Manager to the Issue i.e., the Merchant bankers who would check all the documentation including all the financial documents, material contracts, Government Approvals, Promoter details etc. This exercise would also help in preparing Offer Document appropriately.
4. In-principal approval of draft prospectus – The Issuer shall file the draft prospectus along with the documents in accordance with the SEBI (ICDR) Regulations, other statutes, notifications, circulars, etc. governing preparation and issue of prospectus prevailing at the relevant time. The Issuers may particularly bear in mind the provisions of Companies Act, Securities Contracts (Regulation) Act, the SEBI Act and the relevant subordinate legislations thereto.
5. Application to BSE SME Exchange – On completion of Due diligence by the merchant Banker along with approval of the Draft prospectus, an application shall be filed with the stock exchange for admission of their securities to dealings in their respective exchange, i.e., taking in-principal approval from the stock exchange.
6. Filing of RHP/Prospectus – Merchant Banker then files these documents with the ROC indicating the opening and closing date of the issue. Once approval is received from the ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.
7. Post Listing – Stock Exchange then finalizes the basis of allotment and issues the Notice regarding Listing and Trading.
SOME 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 Team Anupama Tripathi & Associates, for the purpose of education & comment for more, kindly connect @ 8800839633, #[email protected]
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