Process of Listing in the SME Board
CS Neeraj Jain
Mr Neeraj Jain is the Partner of Expert Global Consultants Private Limited
A SEBI Registered Category -1 Merchant Banker
operating out of New Delhi and providing Pan India Services
Conditions Precedent to Listing
The Issuers on the SME platform shall adhere to the conditions precedent to listing, as emerging, inter-alia, from:
- Securities Contracts (Regulations) Act 1956
- Companies Act 1956
- Securities and Exchange Board of India Act 1992
- Any rules and/or regulations framed under the foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under the foregoing statutes.
Eligibility Criteria for Listing on NSE Emerge Platform
Incorporation
The Issuer should be a company incorporated under the Companies Act 1956 / 2013 in India.
Post Issue Paid Up Capital
The post-issue paid-up capital of the company (face value) shall not be more than Rs. 25 crore.
Track Record
Track record of at least three years of either:
- The applicant seeking listing; or
- The promoters/promoting company, incorporated in or outside India; or
- Proprietary / Partnership firm, subsequently converted into a company (not in existence as a company for three years), approaches the Exchange for listing.
Promoters mean one or more persons with a minimum of 3 years of experience in the same line of business and shall be holding at least 20% of the post-issue equity share capital individually or severally.
The company/entity should have an operating profit (earnings before interest, depreciation, and tax) from operations for at least 2 out of 3 financial years preceding the application, and its net worth should be positive.
The company/entity should have positive Free Cash Flow to Equity (FCFE) for at least 2 out of 3 financial years preceding the application.
Other Listing Conditions
- The applicant company has not been referred to the erstwhile Board for Industrial and Financial Reconstruction (BIFR) or no proceedings have been admitted under the Insolvency and Bankruptcy Code against the issuer and Promoting companies.
- The company has not received any winding-up petition admitted by an NCLT/Court.
- No material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company.
- The issuer seeking listing shall ensure that none of the merchant bankers involved in the IPO should have instances of any of their IPO draft offer documents filed with the Exchange being returned in the past 6 months from the date of application. For this purpose, the left lead merchant banker and any other merchant banker, if applicable, who shall be responsible for due diligence activity and drafting of the draft offer document/offer document in terms of the Lead Managers’ Inter-se Allocation of Responsibilities shall be considered.
Rejection Cooling Off Period
The application of the applicant company should not have been rejected by the Exchange in the last 6 complete months.
BSE SME
Incorporation
The Company shall be incorporated under the Companies Act, 1956.
Eligibility Criteria
Post Issue Paid-up Capital
Not more than Rs. 25 crores.
Net Worth
At least Rs. 1 crore for the 2 preceding full financial years.
Note: In cases where a company is formed pursuant to the conversion of a registered proprietorship/partnership/LLP, the partnership firm/LLP needs to have a Net Worth of Rs. 1 crore for the preceding 2 (full) financial years.
Net Tangible Assets
Rs. 3 crores in the last preceding (full) financial year.
Track Record
The track record of the applicant company seeking listing should be at least 3 years. Where the applicant company has taken over a proprietorship concern/registered partnership firm/LLP, then the track record together with such proprietorship concern/registered firm/LLP should be at least 3 years.
- The applicant company seeking listing should have a track record of operations for at least one full financial year and audited financial results for one full financial year.
Earnings before Interest, Depreciation, and Tax
- The company/proprietorship concern/registered firm/LLP should have operating profit (earnings before interest, depreciation, and tax) from operations for 2 out of 3 latest financial years preceding the application date.
- For companies seeking listing where the project has been appraised and funded by NABARD, SIDBI, Banks (other than co-operative banks), Financial Institutions, it shall have positive operating profit (earnings before interest, depreciation, and tax) from operations in one full preceding financial year.
Leverage Ratio
Leverage ratio of not more than 3:1. Relaxation may be granted to finance companies.
Disciplinary Action
- No regulatory action of suspension of trading against the promoter(s) or companies promoted by the promoters by any stock Exchange having nationwide trading terminals.
- The Promoter(s) or directors shall not be promoter(s) or directors (other than independent directors) of compulsory delisted companies by the Exchange and the applicability of consequences of compulsory delisting is attracted or companies that are suspended from trading on account of non-compliance.
Default
No pending defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders by the applicant company, promoters/promoting company(ies), Subsidiary Companies.
Name Change
In case of a name change within the last one year, at least 50% of the revenue calculated on a restated and consolidated basis for the preceding 1 full financial year should have been earned from the activity indicated by its new name. The activity suggesting name should have contributed to at least 50% of the revenue, calculated on a restated and consolidated basis, for the preceding one full financial year.