Launch of SME (Small and Medium Enterprises) Platform by both NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) will be next big development in the Capital Markets. Government of India is keenly looking forward for SME (Small and Medium Enterprises) Platform as SME contribute 8 per cent to India’s GDP and also the largest generator of employment in the economy. So, providing capital to these SME (Small and Medium Enterprises) is one of the top priorities of the government’s agenda.
Regulations are in place, infrastructure is ready and both exchanges, BSE and NSE, are waiting for the final regulatory nod. These exchanges are already started wooing the companies to list/mitigate to this new Small and Medium Enterprises platform.
- Company issue size with paid-up Capital of less than Rs.10 crore can list on the SME (Small and Medium Enterprises) Platform
- Companies with capital exceeding 25 crore should list on the main exchange and will not be allowed in SME (Small and Medium Enterprises) Platform
- Companies have an option to either list in Main exchange or in SME (Small and Medium Enterprises) Platform if the post-issue capital ranges between 10 crore and 25 crore.
- SEBI (Securites and Exchange board of India) shall not issue any observation on the offer document and the responsibility falls on Merchant Banker to make sure that the information in the offer document is accurate and NOT misleading.
- Companies need to disclose half-yearly financial results and not required to send annual reports to every shareholder. (Annual reports can be displayed on company’s website)
- Minimum application value in IPO (Initial Public Offering) is Rs.1 Lakh
- Minimum number of allottees in an issue is 50
- Minimum trading lot size is Rs.1 Lakh
- Merchant bankers to the issue must ensure that the issue is fully underwritten and they are required to subscribe to 15 per cent of the issue themselves.
- Merchant bankers also need to make sure that market making for the scrip for 3 years from the date of listing
Small and Medium Enterprises (SME) platform versus Main Exchange
Most of the companies prefer the main exchange instead of SME (Small and Medium Enterprises) Platform as SME find it harder to raise capital due to lower visibility and doubts about governance of corporate compared tothe companies listed in main exchanges. Even though, the regulations have given some relaxations to these SME (small and medium enterprises) in the form of reduced costs for making public issue and to reduce operating costs, companies prefer to increase their capitalto more that 10 crore and list on the main exchange. Companies don’t mind to bear higher public cost and higher compliance on the main exchanges.