By: Hem - 17-Jul-2021

Steps to SME IPO Exchange

Small and Medium-sized Enterprises (SMEs), as the name suggests, are small business units.India boasts a significant number of SMEs that contribute to the overall GDP of the country. These SMEs belong to various sectors including, retail, education, IT, and digital media to name a few.

What is an SME Exchange?

When an SME comes up with its IPO (Initial Public Offering), it issues its shares through an exchange which is known as the SME Exchange. You can trade in the shares of small and medium scale enterprises through an SME Exchange.

What is an SME Exchange listing?

It is a transformational process wherein small and medium-sized enterprises list their shares on the stock exchange platform to offer them to the public. The procedure helps an SME turn from a private enterprise to a public limited listed company.

On an organizational level, SME IPO platform provides greater employment opportunities at considerably minimal costs than the main board IPO. On a broader scale, the platform works towards correcting the wealth gap in the economy by offering growth opportunities to small & medium-sized businesses.

In recent times, SME Exchange has gained traction among small and medium sized businesses to fuel business growth and grab expansion opportunities.

In India, BSE SME & NSE SME (Emerge) are the two SME Exchange platforms. Currently there are over 300+ listings on BSE SME & 180+ listings on NSE SME (Emerge), making it an emerging stock exchange. The fact that the government is encouraging these budding platforms is also partly responsible for its wide popularity.

Now that you have an idea about SME Exchange listing, let’s look at the eligibility and the procedure.

SME Exchange Listing Criteria:

Criteria for BSE SME:

• The post-issue paid-up capital of the company (face value) shall not be more than Rs. 25 crores.
• Positive Net worth.
• Net tangible assets should be Rs. 1.5 Crore.
• The company should have operating profit (earnings before interest, depreciation, and tax) from operations for at least any 2 out of 3 financial years preceding the application.
• Track record of at least three years.

Criteria for NSE Emerge:

• The post-issue paid-up capital of the company (face value) shall not be more than Rs. 25 crores.
• Positive Net worth.
• The company should have combined positive cash accruals (earnings before depreciation and tax) in any 1 of the year out of the last 3 years.
• Track record of at least three years.

SME Exchange Listing Procedure:

When compared to a regular IPO, the process is comparatively easier. However, it still requires a minimum of 4 months to complete.

• Appointing a Merchant Banker
• Performing due diligence, documentation & pre-IPO preparation
• Preparation of offer document (DRHP)
• Filing of DRHP with relevant SME exchange (BSE SME / NSE Emerge)
• Approval from SME Exchange & RoC, after which the company will provide the stock exchange with their desired opening date of issue.
• Initial Public Offering opening
• Allocation of shares
• Listing & trading of shares upon allocation

If you are looking to get your company listed on an SME exchange, then you might want to consult a professional. Leveraging their knowledge and experience will make the process effortless. HEM Securities carries four decades of expertise in the area. Associating with HEM enables you to reap the benefits of end-to-end assistance from a team of skilled professionals. Get your SME listed with Hem Securities today & open up new opportunities for wealth creation & business expansion.