The most difficult part of starting a new business is not having an idea and plan for its execution but it is raising funds for it. Getting investors and enough capitol to grow your business is quite difficult. Knowing the fact that Small and Medium Enterprises have an integral share in India’s economy as there are nearly 30 million SMEs which provide jobs to more than 70 million people in India.
SMEs being the backbone for the economy, the Bombay Stock Exchange (BSE) has set up the BSE SME Exchange to provide Small and Medium Sized Enterprises (SMEs) a platform for raising equity capital for their growth and expansion. It was established after The Prime Minister’s Task Force suggested to set up a firm and dedicated Stock Exchange for SMEs and SEBI to help them raise funds for the growth and development of their businesses.
Anshu Goel, the founder of the startup called Alphalogic Techsys Limited thinks- “The step of BSE is a really good attempt to push startup environment facilitating the listing of startups in various sectors.”
Which is rightly said by him as this will help startups from multiple industries like e-commerce, IT, ITES, 3D printing, biotech, and space tech. Not only this but the platform will also help in the listing of startups from other sectors including nanotechnologies, big data, defence, drones, robotics, virtual reality, e-gaming, genetic engineering and many more.
But the question is how to list your startup on BSE? As there is a certain criterion that entrepreneurs and SME’s in the industries mentioned above will have to fulfill for their listing on BSE. In this article, we will tell how to list your startup on the BSE SME Exchange along with listing requirements.
Let’s start with listing requirements of BSE SME Exchange. The following are the listing requirements for the BSE SME Exchange:
- The Enterprise must be a Limited Company and should have a website.
- The issuer or SME should have a post-issue face value capital of Rs.1 crore to Rs.25 crores. Companies having a post-issue face value of more than Rs.25 crores need to be listed on the Main Board of the BSE.
- As per the latest audited financial statements Net Worth of the SME (excluding revaluation reserve) must be of minimum Rs.1 crore.
- As per latest audited financial reports the Net Tangible Assets of the SME must be at least Rs.1 crore.
- It is a mandate for the company to facilitate trading in DEMAT securities and enter into an agreement with both Depositories, known as Central Depository Services Limited and National Securities Depository Limited.
- According to Section 205 of The Companies Act, 1956, the company must have a track record of distributable for atleast two out of the immediately preceding three financial years. If not this, then net worth must be atleast Rs. 3 crores.
- The SME should not have any reference before the Board for Industrial and Financial Reconstruction (BIFR).
- The company should not have any winding up petition that has been accepted by a Court.
- The issue must be a 100% underwritten issue. Merchant Banker must underwrite 15% on their own accounts.
- The Merchant Banker to the issue is responsible for market making for a minimum of three years through a stock broker who is registered as a market maker with the SME Exchange.
- There should be a minimum of 50 investors in the company while listing through IPO.
Now let’s step into the details of the procedure for listing on the BSE.
- Appointing a Merchant Banker
To get listed on BSE SME exchange, the Company needs to appoint a Merchant Banker in an advisory capacity.
- Documentation/ Due Diligence
Once you appoint the merchant banker it will conduct due diligence regarding the Company i.e checking the documentation along with the financial documents, material contracts, Government Approvals, and so on. After doing so, it will prepare documentation for the IPO. It necessary to include IPO structure, share issuances and financial requirements in documentation and planning by the Merchant Banker.
- Submitting the Application
After the verification and documentation is done by the Merchant Banker, the draft prospectus and DRHP are submitted as per SEBI requirements.
BSE then verifies the submitted documents and processes the same. BSE Exchange Officials even visit the company’s site and post that the promoters are called for an interview with the Listing Advisory Committee.
On successful completion of the site visit and interview, BSE issues an in-principle approval on the recommendation of the Committee (after all the requirements are compiled by the issuer Company). After getting in-principle approval, the Merchant Banker shall file the Prospectus with the ROC mentioning the opening and closing date of the issue.
Once this gets approved from ROC, they initiate the Exchange regarding the opening dates of the issue along with the required documents.
- Initial Public Offering (IPO)
After the closure of IPO, the company submits the required documents as asked to the BSE SME Exchange for finalization of the basis of allotment. When the allotment gets completed, BSE issues the notice for listing and trading.
After your company gets listed on the BSE SME exchange, existing members are eligible to participate in SME Platform and trade on the share of the SME.
Note: You can get the checklist of documents required for Listing on the BSE SME Exchange on their official website.
Hope the above article gave you all required insights and will turn out helpful in listing for the company on BSE.