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Regulatory Compliance in India
 
SME IPO/ Stock Exchange Listing

Small & Medium Businesses generate about 35% of the GDP of India and account 40% of exports. With more graduates and professional looking towards becoming entrepreneurs and expand existing businesses, Funds are the greatest limitations stopping these talented group of people from reaching the next level. With the opening up of Capital Markets to SME’s, a new avenue has been opened for enterprises that are running high on debt to expand their capital base and reduce finance cost. This also leads to building a credible image before customers and liquidity and credibility for investors. Now SME’s are going to be Big!!!
SEBI has drafted listing agreement for SME’s and given approval to BSE and NSE to setup dedicated platform for SME’s. SEBI has also relaxed the requirements for listing in SME Stock Exchange. Going for initial public offering (IPO) is ultimate dream for every business; Professionals like Chartered Accountants are well experienced for ensuring smooth transition and advising on financial matters.

Our services to SME’s going for IPO/ listing in Stock Exchange
Chartered Accountant services

  • Due diligence for:
    • Regulatory compliance
    • Indian GAAP and IFRS compliance
  • Advisory service:
    • Devising efficient capital structure
    • Business and share valuation
    • Preparation of Project Reports
    • Profiling business promoters and management
  • Enterprise Risk Management
  • Certification of restated financial statements
  • Auditing of financial statements

Company Secretary Services

  • Listing agreement compliance
  • Brokers Audit
  • Securities Audit
  • Advising on corporate restructuring

SME IPO – Frequently asked questions

  • Who can go for SME IPO?

Companies / Firms can go for SME IPO who are looking to raise funds by diluting their control to a small extent. Basic requirement would be:

  • Strong and Dynamic top management.
  • Good track record of past performance.
  • Group of talent people to carry the expectation and sustain.
  • Long term plans displaying need of expansion and market stability.
  • What are the things to be considered before going for IPO?

The company which intends to go for SME IPO or list in SME stock exchange has to complete following procedures.

  • Prepare annual reports and get it audited.
  • Create a website of the company, if not available.
  • Convert private limited to public limited company.
  • Appoint a full time Company Secretary.
  • Appoint reputed CA firm to conduct peer review of audit of last year & restate the accounts for last 5 years.
  • Detailed disclosure on:
    • Past performance of the company
    • Operation of business of company
    • Risk factors involved in running business.
    • Pending litigation against company, its magnitude & ramification.
    • Promoters & management.
    • Material contracts & agreements.
  • Prepare project report with details of income & expanses for at least 3 years.
  • Due diligence has to be performed on
  • Regulatory compliance followed by the company.
  • Legal compliance necessary for company through a reputed legal firm.
  • Appointment of Independent director.

 

  • What is the procedure for listing in SME Stock Exchange?

Procedure for Listing

  • Increase Authorized Capital
  • Identification & Selection of following Parties
  • Merchant banker
  • Investors
  • Registrars  & Transfer Agents
  • Advertising Agents
  • Underwriters
  • Hosting Code of Conduct on company website
  • Constitute following Committees – Audit, Share holder, Grievance, Remuneration etc.,
  • Agreement with NSDL &CDSL & Obtaining ISIN (International Security Identification Number)
  • Filing Red Herring Prospectus (RHP) with Stock Exchange & SEBI & application for In-principle approval from stock exchange.
  • Filing RHP with ROC & Obtaining clearance
  • In case of IPO, issue shares and close and  list in the Stock exchange or company can also directly list in Stock Exchange with group of informed investors
  • Filing trading application with Stock Exchange
  • What is the general difference between listing in SME Stock Exchange & Main Board of Stock Exchange?

Difference between SME Platform & Main board

 

 

SME      

Main Board

1

Capital Requirement

Min - 1crore / Max - 25crore

Min - 10crore / Max – No limit

2

Trace Period of Profit

Not Mandatory

Mandatory 3 out of 5 years with last year showing profits.

3

Underwriting

100%

Not Mandatory

4

Market making

3 years completion  

 Not Mandatory

5

Period   

2-4 months   

8-10 months 

6

SEBI Approval

Waived

Mandatory

7

Min Investors           

50

1000

8

Lot size for trading

Rs.100000

1 Nos

9

Return of Financial

Half year

Quarterly

10

Annual Report

Abridged version is alright & full report can be put on website.

Full report to be sent

  • What are the platforms available for SME’s Stock Exchange?              

Plat form Available in India
BSE has launched BSE SME to enable SME listing and NSE has launched NSE Emerge. 

  • What is the cost saving for SME Stock Exchange compared to Main Board of Stock Exchange?

Cost Saving (in INR)

 

 

SME      

Main Board

Saving

1

SEBI Approval

-

Min 25,000

25,000

2

Approval for stock exchange

-

Min 50,000

50,000

3

Listing fee      

50,000

20,000

(30,000)

4

Annual fee     

25,000

Min 80,000

55,000

 

Total

75,000

175,000

100,000

  • What are the benefits to SME by listing in SME Stock Exchange?

Benefits of SME Listing is

  • Better visibility of company as it forms part of analysts review & the image of company is raised in eye of suppliers, customers and investors.
  • Raise much wanted funds for expansion.
  • Reduce the debt liabilities and reduces the finance cost thereby improving the balance sheet of the company.
  • Companies can any time raise funds through CDR, Preference share etc.,
  • Improve Liquidity of shares in the company shall attract more investors as they can exit easily.
  • What are the challenges faced by SME’s for listing?

Major Challenges are

    • Merchant Bankers are the most important part of the success of SME listing. Since    100% underwriting is essential, convincing merchant banks will be most crucial and toughest part.
    • As merchant banks charge hefty amounts for market making hence the cost of raising capital increases.


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