SME Listing

CA Mehul Mukati

Axia Advisory Services Pvt Ltd

Disclaimer
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This presentation is intended only for information and is not and cannot to be construed as legal advice. Axia Advisory Services Pvt Ltd, the author or any of its affiliates cannot be held liable for any action take on the basis of this presentation.

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Background
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BSE and NSE two leading platforms for stock exchanges Their present listing norms make it difficult for MSMEs to raise growth capital [equity] from public at large

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Post-Issue Paid-Up Equity

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<10 cr SME Board

10-25 cr

>25 cr Main Board

Option

This is Post-Issue Paid-Up Equity Capital and NOT the Net Worth the present Paid-Up or Authorised Equity Capital
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Other Guidelines
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Underwriting
Mandatory for full issue, i.e. 100% Merchant Bankers to underwrite 15% on own account

Market Making mandatory

For a period of 3 years after listing

Min 50 investors required

Not a continuous requirement

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Other Post-Listing Points

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Application and trading lot size is 1 lakh

to curtail entry of retail investors

Minimum depth to be of 1 lakh Investors holding with value less than 1 lakh allowed to offer their holding to the market maker in one lot

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IPO Mode
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IPO can be made through the

fixed price method book building method or combination of both

Fixed Price Method

Issuer pre-decides issue price

Book Building Method

Issuer pre-decides issue price band Issue Price determined by investor interest, i.e. open auction within price band
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BSE Key Listing Criteria

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Net Worth
Min Tangible Net Worth of 1 crore* Exclude revaluati on reserves

Profits

Additional Net Worth

If profit criteria is not met, NW 3 crore

Distributable profits (s.205 CA56) in at least 2 of past 3 FY Year = 12m EOI to be ignored

*as per latest audited annual report

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BSE Key Listing Criteria

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Post-Issue paid-up capital to be at least 1 crore

Max paid-up capital: 25 crore

Other requirements
Only demat shares
Min 50% of public shareholding in demat

Company website

Promoters to be interviewed by BSEs Listing Advisory Committee

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BSE Key Listing Criteria

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Certificate from applicant / promoters that

Company is not referred to BIFR
Companies out of BIFR are not allowed

No winding up petition accepted by a court

Promoters to be interviewed by the Listing Advisory Committee

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BSE Fees
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One-Time Listing Fee: 50,000 Annual Fee based on Market Cap

<= Rs50 crores >Rs50 crores 25,000 50,000

Use of Book Building Software (based on Issue Size)

<= Rs25 crores > Rs25 crores 2.5 lakhs 4.0 lakhs

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Preparatory
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Financials Secretarial Corporate Governance Disclosures Others

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Preparatory Financials
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Minimum past 3 years

Detailed financials to be provided

Comparable
Restatement may be required

Group brief financials Minimum equity capital / net-worth requirement

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Preparatory Secretarial
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Board Meeting Authority and Delegation AGM / SGM Banking

Accounts Loans

Expansion
Board discussions Financial viability / forecasts
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Preparatory - Corp Governance

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Independent Directors Committees of Board

Audit Remuneration Shareholder Grievance

CV of all promoters
Including certificates, if applicable

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Preparatory IPO Disclosures

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Financials of all group entities

Companies Partnerships HUF Proprietary

List of Family of Promoters Key Management Personnel

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Post IPO Disclosures

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Results Declaration
SME Exchange Half-Yearly

Need not publish financial results

can make it available on their website

Announcements for all major events Purchase / Sale of company shares by promoters / management May send to shareholders
statement of salient features of all documents [proviso to s.219(b)(iv) CA, 1956] instead of full Annual Report
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Others
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Shares to be mandatorily in dematerialised form

Registrar and Share Transfer Agent Depository

Detailed listing of all ongoing litigation

Labour / suppliers / clients / etc

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Preparatory Checklist 1 / 4
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Keeping Annual Reports on accounts ready Detailed Disclosures about the past financial performance Future Projections (CMA Data) for at least next 3 years Conversion of private limited company to public limited Appointing full time company secretary (Compliance Officer) 50% independent directors
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Preparatory Checklist 2 / 4
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Due diligence on the applicability of various Regulations Due diligence (Legal) by Legal firms Due Diligence on the various approvals required from Regulatory Bodies Detailed disclosures about the Promoters & Management

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Preparatory Checklist 3 / 4
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Detailed disclosures about the Risk Factors Detailed disclosures about the External Environment effecting the company Detailed disclosures about the litigations, its magnitude and ramifications Detailed disclosures about the Business activity Documenting the Material Contracts and Agreements
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Preparatory Checklist 4 / 4
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Selection of
Investment Banker Registrar and Transfer Agent (RTA) Syndicate Member Escrow Bankers electronic media and advertising agency

* Not full list, only indicative

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Listing Process
23 Convert to Public Limited (X) Conversion docs to ROC - MoA / AoA, etc (X+5) Peer review auditors + Restated financials (X+18) ROC Approval for Conversion (X+7) Tri-Partite Agreement: NSDL & CDSL (X+18) Appointment of RTA (X+7 / X) Appointment of MD, WTD, ID, CS (X+12)

Appointment of MB / MM (X+18)

Preparation of website (X+18)

Constitution of Committees (X+15)

Preparation of Project Report and RHP (X+35)

RHP to SE/SEBI (X+35)

Clearance from SE (X+65)

Filing of RHP with ROC + ROC clearance (X+70)

Final Prospectus to SE / SEBI (X+75)

Listing approval from SE (X+95)

Listing Application with SE (X+93)

Allotment of Shares (X+90)

Closing of the Issue (X+83)

Opening of the Issue (X+80)

Demat credit of shares (X+96)

Trading Application to SE (X+98)

Trading Approval from SE (X+100)

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Obligations of Market Makers

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Merchant Bankers

MMs to provide 2-way quote for 75% of daily time Market makers to compete with each other Exchange to prescribe min spread between bid / ask price Promoter holding not eligible market making Market Maker to hold min. 5% of issue size on date of listing Max 5 market makers

to undertake market making through eligible stock brokers responsible for market making for min 3 years

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Thank You
CA Mehul Mukati
Director, Axia Advisory Services Pvt Ltd contact@axiaindia.com

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