How to List on BSE SME Exchange

Narendra Kumar

06 Sep, 2022

There are two ways of raising capital. Either borrowing from banks or funds from promoters. Banking funds are the most common type of borrowings. But for a startup company, to bear the cost of borrowed funds is very risky. Despite the benefits associated with the public listing, the SMEs were not able to access the capital markets through Stock Exchanges due to several factors such as stringent regulatory compliances, disclosure and financial requirements, etc. The BSE SME Exchange has been set up by the Bombay Stock Exchange (BSE) to provide Small and Medium-Sized Enterprises (SMEs), a platform for raising equity capital for their growth and expansion, in March 2012.

A dedicated stock exchange for SMEs would allow them accessing the capital markets easily, quickly and at lesser costs. SME (Small and Medium-size Enterprises) exchange is a platform made by the BSE (Bombay Stock Exchange) in 2012 by the initiative of the Indian Government along with SEBI. It is a phenomenal framework for entrepreneurs. It is a popular concept worldwide.

Need for SME Exchange:

• A dedicated stock exchange will provide SMEs with equal financing opportunities to grow their business.
• Listing to the company would facilitate the expansion of the investor’ base, which in turn will help the company to get equity finance.
• With the availability of equity financing, the debt burden can be set lower resulting in a healthier balance sheet and lowered financing cost.
• The company’s transparency will be increased by the participation of venture capital players, who invest in a company for their growth and expansion.
• Ensures Tax Benefits.
• Enables liquidity for shareholders.

SEBI Norms for Listing:

Under the SME platform for the listing of specified securities, the entity has to comply with the following provisions:

• The SME must be a limited
• The post-issue face value capital should not exceed INR. 25 Crore (Twenty-five crores)
• The minimum application and trading lot size shall not be less than INR 1 lakh (one lakh)
• Net Worth must be at least Rs.1 crore as per the latest audited financial statements
• The company must have a track record of distributable profits in terms of section 123 of Companies Act. 2013^[1] for at least two out of the immediately preceding three financial years. Otherwise, net worth must be at least INR. 3 crores.
• The company must facilitate trading in DEMAT securities and enter into an agreement with both the depositories i.e. NSDL and CDSL.
• The company shall mandatorily have a website
• The issue must be a 100% underwritten issue. Merchant Banker License must underwrite 15% on their own accounts.
• The company must have a minimum of 50 investors while listing through IPO.

In order to fulfill SEBI ICDR Regulations, consequent amendments have been made to various other regulations such as:

• SEBI (Merchant Bankers) Regulations 1992
• SEBI (Foreign Institutional Investors) Regulations, 1995
• SEBI (Venture Capital Funds) Regulations, 1996
• SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 and
• SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

Read our article:SME Exchanges and Benefits of SME Listing

Procedure for Listing on the BSE SME Exchange:

Step 1: Appointment of Merchant Banker

A Merchant Banker must be appointed by the company for the listing on the BSE SME exchange.

Step 2: Due diligence and Documentation

The Merchant Banker should conduct due diligence regarding the Company i.e. checking the documentation including all the financial documents, material contracts/agreements, Government Approvals, Promoter details, etc. and preparing the documentation for the IPO. Planning and documentation by the Merchant Banker must include

• IPO structure,
• issuance of shares and
• other financial requirements.

Step 3: Application to BSE SME Exchange

• Submission of DRHP/Draft Prospectus

Merchant Banker has to prepare documents which shall be filed with the Exchange as well as with SEBI as per requirements.

• Verification & Site Visit

BSE verifies the documents and processes the same. A visit to the company’s site shall be undertaken by the Exchange official. The interview is to be conducted by the Promoters and Listing Advisory Committee.

• Approval

All the requirements are compiled by the Issuer Company in respect of the BSE listing process issues an In-Principle approval on the recommendation of the Committee.

• Filing of DRHP/Prospectus

Merchant Banker has to file these documents with the ROC indicating the opening and closing date of the issue. Once approval is received from the ROC, the opening dates of the issue along with the required documents have to be intimated to the Exchange by him.

Step 4: Initial Public Offer (IPO)

The IPO opens and closes as per schedule. After the closure of the IPO, the Company submits the documents as per the checklist to the Exchange for finalization of the basis of allotment.

Step 5: Post Listing

BSE finalizes the basis of allotment and issues the Notice regarding Listing and Trading. 

Documents Required for Listing on the BSE SME Exchange

1. Copies of the draft offer document
2. Soft copy of the prospectus for uploading on the website
3. PAN &TAN of the company
4. DIN & PAN of promoter and directors
5. Articles & Memorandum of Association of the Company
6. Balance Sheets, Profit & Loss Accounts, and Cash Flow Statements
7. Copy of resolution passed by the Board of Directors for the issue of securities
8. Copy of the shareholder’s resolution under 62(1)(c) of Companies Act, 2013
9. Such other documents are required from time to time as per schedule.

If you want to avail of any service in respect of the SME Listing, Interslice will provide you the tailor-made services and end to end processing regarding the same. For more information, visit our website www.enterslice.com or email us at info@enterslice.com.