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Eligibility criteria for SME IPO
SEBI Guidelines
1. Max Post Issue capital – Rs.25 crores
2. Min No. of members for Issue – 50
3. After listing, no min no. of members required to be continued
4. Market making – Mandatory for 3 years
5. Underwriting – 100% (Merchant Bankers to underwrite 15% in own account)
6. Minimum application and Trading Lot size – Rs.1,00,000/- or in multiples thereof
BSE Guidelines
· Net Tangible assets of at least Rs.3 crores as per the latest audited financial results
· Net worth (excluding revaluation reserves) of at least Rs.3 crores as per the latest audited financial results.
· Track record of distributable profits in terms of sec. 123 of Companies Act, 2013 for at least two years out of immediately preceding three financial years and each financial year has to be a period of at least 12 months. Extraordinary income will not be considered for the purpose of calculating distributable profits.
OR
Net worth shall be at least Rs. 5 crores.
· The post-issue paid up capital of the company shall be at least Rs.3 crores.
· Other Requirements:
· The Company shall have a website
· The company shall mandatorily facilitate trading in demat securities and enter into an agreement with both the depositories.
· There should not be any change in the promoters of the company in preceding one year from date of filing the application to BSE for listing under SME segment.
Certificate from the applicant company / promoting companies stating the following:
· The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR).
· There is no winding up petition against the company that has been accepted by a court.
Note: Cases where company is out of BIFR are allowed.
Listing Process will also involve
· Visit to the registered office of the Company by BSE officials to verify general documents and processes followed in the Company.
· Promoters to attend an interview with the Listing Advisory Committee.
Migration from BSE SME Exchange to the main Board of BSE:
· It is mandatory for the company to be listed and traded on the BSE SME Platform for a minimum period of two years.
· Post issue capital should be more than Rs.10 crores and upto Rs.25 crores.
· Shareholders’ approval to be sought by special resolution passed through postal ballot – In postal ballot, the votes cast by shareholders other than promoters in favour of the proposal to migrate to Main Board should be at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal to migrate to Main Board.
· To fulfill the eligibility criteria for migration to Main Board – The companies seeking migration to Main Board of BSE should satisfy the eligibility criteria as specified in 26 of SEBI (ICDR) Regulations, 2009 either at the time of initial listing on SME platform or at the time of seeking migration to Main Board. However, same will not be applicable where the company had sought listing on SME platform by following the book building process and as per the requirements prescribed in 26(2) of SEBI (ICDR) Regulations, 2009.
Procedure and Timeline
| Sr. No. | Procedure | Timeline |
| 1. | Conversion of Company into Public Limited Company, if applicable | X |
| 2. | Preparation of Documents for conversion and submission to ROC for approval i.e. Alteration of Memorandum, Articles & filing of necessary forms for appointment of aforesaid directors | X+5 |
| 3. | ROC approval accorded for conversion | X+7 |
| 4. | Identification & appointment of Registrar & Transfer Agents & Submission of Master Creation forms with NSDL, CDSL for establishing connectivity | X+7 |
| 5. | Appointment of Managing Director, Whole Time Director, Independent Directors, Company Secretary & deciding about their remuneration, sitting fees etc. | X+12 |
| 6. | Constitution of committees – Audit, Shareholder Grievance, Remuneration etc. As per SEBI Listing Obligations and Disclosure Requirements Regulations | X+15 |
| 7. | Preparation of website of the Company & hosting code of conduct on the website | X+18 |
| 8. | Signing of Tri-Partite Agreement with NSDL & CDSL and receipt of ISIN | X+18 |
| 9. | Identification & appointment of peer review auditors & getting the financials of last 5 years restated and for last 1 year re-audited from peer review auditors as per SEBI (ICDR) Regulations, 2009 | X+18 |
| 10. | Appointment of Merchant Banker & Market Maker | X+18 |
| 11. | Preparation of Project Report and Draft Red Herring Prospectus (DRHP) / Prospectus | X+35 |
| 12. | Filing of Draft Red Herring Prospectus (DRHP) with stock exchange & SEBI (only for hosting) | X+35 |
| 13. | Visit to registered office of the Company by BSE officials and promoters interview with Listing Advisory Committee | X+55 |
| 14. | In Principle approval from stock exchange | X+65 |
| 15. | Filing of Draft Red Herring Prospectus (DRHP) with ROC & getting it cleared from ROC | X+70 |
| 16. | Filing of Final Prospectus with Stock exchange and SEBI | X+75 |
| 17. | Opening of the Issue | X+80 |
| 18. | Closing of the Issue | X+83 |
| 19. | Allotment of shares | X+90 |
| 20. | Filing of listing application with Stock exchange | X+93 |
| 21. | Receipt of listing approval from Stock exchange | X+95 |
| 22. | Filing of corporate action form with NSDL & CDSL and demat credit of shares | X+96 |
| 23. | Filing of trading application with Stock exchange | X+98 |
| 24. | Receipt of trading approval from Stock exchange | X+100 |
Cost Structure
Savings in Cost of Raising an IPO through SME platform
| Sr. No. | Particulars | Cost on Main Board | Cost on SME Platform | Minimum Savings in Cost |
| 1) | Need for SEBI Approval & fees | SEBI approval for DRHP is a preliminary condition for IPO Fees:-
Based on Issue Size |
SEBI approval has been waived off.
Hence this cost is eliminated. |
Rs. 25,000/- |
| 2) | Need for In principle approval of stock exchanges & fees | There is requirement to seek in-principle approval of stock exchanges where the shares are proposed to be listed post IPO.
Processing Fees:- |
In-principle approval of stock exchanges has been waived off.
Hence this cost is eliminated. |
Rs. 50,000/- |
| 3) | Initial Listing Fees (BSE) | Rs. 20,000/- | Rs. 50,000/- | (Rs. 30,000) |
| 4) | Annual Listing Fees (BSE) | Based on paid up capital
Min – Rs. 2,00,000/- upto listed capital of Rs. 150 crores |
Based on Market Capitalization
Rs. 25,000/- upto or 0.01% of full market capitalization, whichever is higher |
Rs. 1,75,000/- |
| 5) | Fees for using the Book Building Software | Not Applicable | Based on Issue size:- Upto Rs. 10 crores – 1 lakhs Above Rs. 10 crores – 1.5 lakhs |
– |
| Total Savings | Rs. 2,20,000/- |
Listing / Compliance & Migration Norms
Comparison of Listing and Compliance Norms of SME Exchange with Main Board
| Sr. No. | Particulars | Main Board | SME Platform |
| 1. | Eligibility | Minimum Post Issue Paid up capital – Rs. 10 crore |
Minimum Post Issue Paid up capital – Rs. 3 crores
Maximum Post Issue Paid up capital – Rs. 25 crores |
| 2. | Track Record of Distributable Profits | The must be a distributable profits in 3 out of immediately preceding 5 years, with the last year showing profits | The must be a distributable profits in 2 out of immediately preceding 3 years
OR Net worth shall be Rs. 5 crores |
| 3. | Underwriting | Not Mandatory | 100% underwritten issues. Merchant bankers are required to underwrite upto 15% on their own account |
| 4. | Market Making | Not Mandatory | Merchant bankers are required to undertake market making for a period of 3 years |
| 5. | Time Line | 8-10 months | 3-4 months |
| 6. | Need for SEBI Approval & fees | SEBI approval for DRHP is a preliminary condition for IPO.
Fees:- Based on Issue Size |
SEBI approval is not required. Hence this cost is eliminated. |
| 7. | Need for Inprinciple approval of stock exchanges & fees | There is requirement to seek in-principle approval of stock exchanges where the shares are proposed to be listed post IPO.
Processing Fees:- 0.05 % of issue size |
In-principle approval of stock exchanges is not required.
Hence this cost is eliminated. |
| 8. | Need for Public notice | Public notice of 1 month before opening of the offer | Public notice is not required. |
| 9. | Minimum number of investors | Minimum 1000 investors | 50 at the time of listing. No post listing continuous requirement of minimum number of shareholders |
| 10. | Initial Listing Fees (BSE) | Rs. 20,000/- | Rs. 50,000/- |
| 11. | Annual Listing Fees (BSE) | Based on paid up capital
Min – Rs. 15,000/- |
Rs. 25,000/- or 0.01% of full market capitalization, whichever is higher |
| 12. | Fees for using the Book Building Software | Not Applicable | Based on Issue size:- Upto Rs. 10 crores – 1 lakh Above Rs. 10 crores – 1.5 lakhs |
| 13. | Trading Lot Size | 1 | Rs. 1,00,000/- |
| Compliance Norms | |||
| 14. | Shareholding Pattern submission | Quarterly Basis | Half Yearly Basis |
| 15. | Financial results submission | Quarterly Basis | Half Yearly Basis |
| 16. | Publication of financial results | On Quarterly Basis, financials to be published in 1 English newspaper and 1 newspaper of regional language where the registered office of the Company is situated | No requirement of publication. Only hosting on Company’s website is sufficient |
Migration Norms from Main Board to SME and Vice versa:
1. Migration from BSE SME Exchange to the Main Board of BSE:
o It is mandatory for the company to be listed and traded on the BSE SME Platform for a minimum period of two years
o Post issue capital should be more than Rs. 10 crores and upto Rs. 25 crores
o Shareholders’ approval to be sought by special resolution passed through postal ballot – In postal ballot, the votes cast by shareholders other than promoters in favour of the proposal to migrate to Main Board should be at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal to migrate to Main Board
o To fulfill the eligibility criteria for migration to Main Board – The companies seeking migration to Main Board of BSE should satisfy the eligibility criteria as specified in 26 of SEBI (ICDR) Regulations, 2009 either at the time of initial listing on SME platform or at the time of seeking migration to Main Board. However, same will not be applicable where the company had sought listing on SME platform by following the book building process and as per the requirements prescribed in 26(2) of SEBI (ICDR) Regulations, 2009.
2. Migration From Main Board To SME Exchange:
o Shareholders’ approval to be sought by special resolution passed through postal ballot – In postal ballot, the votes cast by shareholders other than promoters in favour of the proposal to migrate to Main Board should be at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal to migrate to Main Board
o Face value capital should be less than Rs. 25 crores.
o All eligibility criteria of SME exchange must be fulfilled.