All you need to know about Startup Listing

4th Jul 2019
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To achieve a target of $5 trillion economy till 2024, growth of entrepreneurship is important. To give a boost to startups and to provide them with the platform to turn them into giant corporates, the government has come up with the idea to start listing startups on stock exchanges. BSE will be the first stock exchange in India to provide startup listing.


This article explained out the criteria which need to be satisfied by startups to get listed on BSE (Bombay Stock Exchange).


Eligibility

The startup should be incorporated under the Companies Act 1956/2013.


Currently, BSE has specified startups from the following sector will be eligible to get listed on BSE.


 IT, ITES, Biotechnology, and Life Science, 3D Printing, Space technology, E-Commerce, Hi-Tech Defense, Drones, Nano Technologies, Artificial Intelligence, Big data, Enhance/Virtual Reality, E-gaming, Exoskeleton, Robotics, Holographic Technology, Genetic Engineering, Variable Computers Inside body computer technology and other Hi-tech based companies. 


Financials

  • The company should be registered as a startup with MSME/DIPP. In case, the startup is not registered under either of these, then the concerned startup should have a minimum paid -up capital of Rs.1 crore.      (Minimum IPO size-Rs.1 lakh)
  • The post-issue paid-up capital (face value) shall not be more than Rs.25 crores.
  • The company should have in existence for a minimum period of 2 years on the date of filing the draft prospectus with BSE.
  • The net should be positive.
  • Minimum pre-tax operating profit/Issue size- No restrictions
  • Minimum number of allottees in IPO: 15               
  • IPO underwriting: 100 % underwritten (At least 15% of the issue size on the books of merchant banker)   
  •         

Other requirements

  •  It is mandatory for a company to have a website.
  • It is mandatory for a company to 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 the date of filing the application with BSE.


Disclosures

  • The company has not been referred to NCLT under Insolvency and Bankruptcy Code, 2016.
  • There is no winding up petition against the company that has been accepted by NCLT.
  • None of the promoters/directors of the company has been debarred by any regulatory agencies.


Listing process

Planning 

The Issuer Company consults and appoints the Merchant Banker/s in an advisory capacity.

Preparation

The Merchant Banker prepares the documentation for filing after:

  • conducting due diligence regarding the Company i.e checking the documentation including all the financial documents, material contracts, Government Approvals, Promoter details, etc.
  • and planning the IPO structure, share issuances, and financial requirements


Process

Application procedure:

  • Submission of DRHP/Draft Prospectus - These documents are prepared by the Merchant Banker and 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 Promoters are called for an interview with the Listing Advisory Committee.
  • Approval - BSE issues an In-Principle approval on the recommendation of the Committee, provided all the requirements are compiled by the Issuer Company. 
  • Filing of RHP/Prospectus - Merchant Banker files these documents with the ROC indicating the opening and closing date of the issue. 
  • Once approval is received from the ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.


Public Offering

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

Post Listing

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



Opportunities for the following market participants. 

Entrepreneurs 

To raise equity capital for growth and expansion of Startups in a cost-effective manner. 

Investors 

Opportunities to identify and invest in good companies at an early stage and Exit Route. 



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    Authors
    Shobhit Jain

    The author is a qualified Chartered Accountant (founder of Arhad Consultancy) and is engaged in providing business advisory services to startups and companies.



    Website: www.arhadconsultancy.com

    Email: arhad.consultancy @ gmail.com


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