BSE IndoNext was formed to benefit small and medium size companies, the investors in these

companies and the capital market as a whole.

Investors and the companies, which are listed only on Regional Stock Exchanges (RSEs) have
been impacted severely, as the RSEs are recording either nil or negligible trading volumes.
Investors in such small and medium companies are therefore unable to find an exit route and
realize fair market value of their investments. The companies listed only at RSEs find it extremely
difficult, if not impossible, to raise fresh resources from the capital markets in the absence of price
discovery of their securities in the secondary market. New small and medium enterprises (SMEs)
have also been unable to tap the markets to raise equity and debt, to fund their plans.

Bombay Stock Exchange Ltd. (BSE) and the Federation of Indian Stock Exchanges (FISE)
believe in igniting growth by putting the smile back on the SMEs and also allow new SMEs to
bloom. Small businesses could become the backbone of our economy, and an avenue for
massive employment generation.

BSE and FISE (which represents 20 RSEs), have jointly created an alternate national platform
named BSE IndoNext, to enable SMEs to raise equity and debt, and facilitate trading in such
companies, both old and new.

The BSE IndoNext would help the investors to reach the BSE IndoNext traded scrips in addition
to the network of BSE, also through the network of about 7,000 members of RSEs, who cater to
the investors in the far - flung areas of the country and, thus, contribute to the development of the
capital market. BSE IndoNext thus, envisages harnessing advantages of creating a single
national trading platform, with a large number of member participation, which would help achieve
a fairly vibrant trading platform for SMEs.

Objectives

The BSE IndoNext Segment has the following objectives:

• To allow companies listed only with RSEs to raise fresh resources from the capital
market, given higher liquidity in their shares.
• To create liquidity in all the scrips listed on the Exchanges.
• To provide an avenue for new SMEs from various regions of the country to raise fresh
resources from the capital markets, which would help, achieve balanced regional growth.
• To harness the infrastructure at RSEs

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Organizational Structure

BSE is the Central Participating Exchange and the RSEs, which are participating in BSE
IndoNext are referred to as Participating RSEs.
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Governance of the BSE IndoNext Segment

BSE IndoNext is a joint initiative by BSE and Participating RSEs. In order to instill higher sense of
involvement on the issues relating to management, business development, marketing and
general operations of the BSE IndoNext platform, a "BSE IndoNext Council" has been
constituted. This Council's duties have been defined in the Bye-laws of BSE and participating
RSEs and operate under the overall supervision and control of the Governing Board of BSE.

The Council has 6 representatives from BSE and 5 representatives nominated from RSEs by
FISE. BSE provides secretarial assistance and convene the meetings of this Council. The
Governing Board of BSE appoints the representatives from BSE. Whereas for the initial six
months the representatives from RSE were by FISE, thereafter they are selected for a year
starting from every financial year, based on the highest volume generating RSEs during
immediate preceding year. The meeting elects a Chairman in the beginning of the financial year,
who continues chairing the meeting for the year.

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Participating Exchanges

The following RSEs have participated in the formation of BSE IndoNext ( referred to as the
Participating RSEs).

Name of the participating RSEs

1. The Stock Exchange, Ahmedabad

2. Banglore Stock Exchange Ltd.
3. The Delhi Stock Exchange Association Ltd.
4. Madras Stock Exchange Ltd.
5. The Hyderabad Stock Exchange Ltd.
6. Inter - connected Stock Exchange of India Ltd.
7. Jaipur Stock Exchange Ltd.
8. The U.P. Stock Exchange Ltd.
9. The Ludhiania Stock Exchange Association Ltd.
10. Pune Stock Exchange Ltd.
11. Saurashtra Kutch Stock Exchange Ltd.
12. The Vadodara Stock Exchange Ltd.
13. Cochin Stock Exchange Ltd.
14. Magadh Stock Exchange Association.
15. Coimbatore Stock Exchange Ltd.
16. Guwahati Stock Exchange Ltd.
17. Bhubaneshwar Stock Exchange Association Ltd.
18. Madhya Pradesh Stock Exchange

In case, subsequently, any RSE other than the referred to above wishes to join, the same would
be permitted as per the terms and conditions as laid down for other participating RSEs in
formation of BSE- IndoNext.

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Road map for implementation of BSE IndoNext

To have a quick takeoff of the BSE IndoNext implementation, it was decided to do it in a phased
manner. Phase - I of the BSE IndoNext was launched on 7th January 2005. The detailed road
map of the phases are as follows:

To first establish the trading platform expeditiously, the BSE set up the BSE IndoNext market as
separate trading market on its BOLT system as 'S' group. All the eligible securities in the B1
groups of the BSE were transferred to the 'S' group. Eligible scrips from the participating RSEs
were also introduced in the 'S' group under the permitted category at BSE. The members of the
BSE and the sub brokers of the subsidiaries which are members of the BSE are allowed to trade
in this market. The clearing and settlement as well as the risk management is the sole
responsibility of the BSE at this stage. Implementation may not require any change in the Bye -
laws of the BSE. All members of the BSE, including the subsidiaries of the RSEs thus have an
opportunity to trade on this market without any difficulty.

The participating RSEs whose listed securities are permitted to be traded on BSE IndoNext are
required to ensure compliance of all listing requirements.

BSE and the participating RSEs have constituted a BSE IndoNext Council to monitor the
implementation of the BSE IndoNext.

Further development would be done in subsequent phases for the optimum usage of the network
of the RSEs.

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Trading Model

Trading in the securities of the companies included in BSE IndoNext is done on the BSE's On-
Line Trading (BOLT) system as a separate Segment.Trading is also done through the BSE Webx.
BSE would continue to be the sole owner of the BOLT in all respects, including the BSE IndoNext
feature on the BOLT and this Segment would run under full ownership of BSE.

RSEs are required to discontinue trading in the shares of those companies which are included in
the BSE IndoNext segment. Similarly, BSE is required to discontinue trading in B group' of the
shares of those companies which are included in the BSE IndoNext segment.

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Groups in BSE IndoNext segment

There are two groups in this segment. The first segment is for the r regular scrips of BSE
IndoNext called as 'S' group. The second segment is for the scrips which are transferred to Trade
- to - Trade basis from this segment which would be called as ' TS ' group.

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Eligible Securities

Securities which satisfies the "Guidelines for listing in BSE IndoNext" as laid down by the BSE
IndoNext Council are eligible to trade in the BSE IndoNext segment. Eligible securities from the
following types of companies would be included for trading in BSE IndoNext segment:

• Companies listed with RSEs but not with BSE:

Companies with a minimum paid up capital of Rs. 3 crore listed with RSEs but not with
BSE, would be included in the BSE IndoNext Segment. Participating RSEs may,
however, decide to include the securities of a company with paid up capital above Rs. 20
crore. Securities of those companies which have violated the provisions of the Listing
Agreement and the same have still not been resolved or the companies that have not
paid listing fees etc., would not be eligible for inclusion in the BSE IndoNext. Also,
suitable parameters would be applied to ensure that only those companies are included
whose securities could otherwise be classified in "B1" and "B2" groups of BSE.

• Companies exclusively listed with BSE:

Companies with a paid up capital of Rs. 3 crore listed and traded on BSE in B group on
31st March, 2004 or any subsequent date as may be decided by the BSE IndoNext
Council would be eligible to be included in BSE IndoNext Segment. Since the "Z" group
of BSE comprises of securities of non - complaint companies, the same would not be
included in this Segment.

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ELIGIBITY NORMS FOR PERMITTING TRADING UNDER IndoNext

The entry norms for including a company under BSE IndoNext are as under:

1. Capital

The minimum issued and paid up equity capital shall be Rs. 3 crore.

2. Networth

The minimum net worth shall be Rs.5 crore. (Net worth includes equity capital and free
reserves excluding revaluation reserves).

3. Non-promoter shareholding

A minimum 25% of company's issued capital shall be be with the non-promoter

shareholders. Out of non-promoter holding, if any single shareholder individually or jointly
holds with others, except for banks/FIs /FIIs /OCBs /NRIs, more than 0.5% of the paid up
capital of the company, the same shall not be considered as non-promoter holding.

4. Shareholders

The minimum number of shareholders shall be 500.

5. Asset Base

The company shall have net tangible assets of at least Rs. 3 crore in each of the
preceding 3 full years (of 12 months each).

6. Turnover

The minimum turnover (excluding exceptional items and other income) shall be Rs. 5
crore in each of the preceding 3 financial years (of 12 months each).

7. Profitability

The company shall have a track record of distributable profits in terms of Section 205 of
the Companies Act, 1956, for at least 3 out of immediately preceding 5. This should
exclude non- recurring income.

8. Demat

The company shall have signed with both depositories and mandated for compulsory
demat by SEBI.