Paper Presentation Competition 2012

NAGPUR CHAPTER of WIRC of ICSI

SME LISTING
Small and medium enterprises are the industrial undertaking, business concern and
establishment . In India, it is defined by the THE MICRO, SMALL AND MEDIUM
ENTERPRISES DEVELOPMENT ACT, 2006where,small enterprise whose investment in
plant and machinery is more than twenty five lakh rupees but does not exceed five crore
rupees and if,its in rendering service than investment in equipment is more than ten lakh
rupees but limit is not to exceed two crore rupees.

And medium enterprises it has been defined , whose investment in plant and machinery is
more than five crore rupees but does not exceed ten crore rupees and if,its in rendering
service than investment in equipment is more than one crore rupees but limit is not to exceed
five crore rupees.

Small and Medium Enterprises (SMEs),these enterprises are the initial form of industries who
starts with the baby step investment in their enterprise. In every economy they count for the
industrial growth and expansion , there role are significant in developing nation. In India,
Micro, Small and Medium Enterprises (MSMEs) contribute 8% of its GDP, 45% of the
manufactured output and 40% of exports. It provides employment to about 70 million people
through 30 million enterprises.1

On recommendation made by the Prime Minister's Task Force on Jan. 2010 led to set-up of
a dedicated Stock Exchange/ Platform for SMEs

SEBI has issued a final Circular on May 18, 2010 for setting up a stock exchange / a trading
platform by a recognized Stock Exchange having nationwide trading terminals for SMEs

nd

BSE Publication , 2 Edition, Dec 2011

Presented by Prem Mardi

Electronic copy available at: http://ssrn.com/abstract=2133149

Paper Presentation Competition 2012

NAGPUR CHAPTER of WIRC of ICSI
How does listing of SME helps in improving his financial structure ?

Equity financing lowers the debt burden leading to lower financing costs and healthier
balance sheets for the firms. The continuing requirement for adhering to the stock market
rules for the issuers lower the on-going information and monitoring costs for the banks. it
enhance the company's visibility. Greater public awareness gained through media coverage,
publicly filed documents and coverage of stock by sector investment analysts can provide the
SMEs with greater profile and credibility. This can result in a more diversified groups of
investors, which may increase the demand for that companys shares leading to an increase in
the company's value.

Role of Company Secretary (here refer as CS) in enabling in listing with the SME Exchange.
As updated under the latest dated 19-04-12 Notice no.20120414. Therefore, not only SMEs
but even a CS would explore a mutual opportunity in listing of SME to the Stock Exchange
, it requires following compliance .

1. Net Tangible assets of at least Rs. 1 crore as per the latest audited financial results
2. Net worth (excluding revaluation reserves) of at least Rs. 1 crore as per the latest
audited financial results
3. Track record of distributable profits in terms of sec. 205 of Companies Act, 1956 for
at least two years out of immediately preceding three financial years and each
financial year has to be a period of at least 12 months. Extraordinary income will not
be considered for the purpose of calculating distributable profits. Other wise, the
networth shall be at least Rs 3 Crores.
4. The companys post-issue paid up capital shall be at least Rs. 1 crores. CS on behalf
of the company to arrange into an agreement with Depositors to facilitate in Demat
trading. Lookup for suitable website designer to create for the company, a mandatory
requirement.
5. A certificate stating that company has not been referred to the Board for Industrial
and Financial Reconstruction (BIFR) and where is out of BIFR , another certificate
stating that no winding up petition against the company has been accepted by a court

Presented by Prem Mardi

Electronic copy available at: http://ssrn.com/abstract=2133149

Paper Presentation Competition 2012

NAGPUR CHAPTER of WIRC of ICSI
6. Listing Process will also involve, interview of the promoters with the Listing
Advisory Committee

7. Migration from BSE SME Exchange to the main Board of BSE:

The companies seeking migration to Main Board of BSE should satisfy the eligibility
criteria as specified in 26(1) of SEBI (ICDR) Regulations, 2009 either at the time of
initial listing on SME platform or at the time of seeking migration to Main
Board. However, same will not be applicable where the company had sought listing
on SME platform by following the process and requirements prescribed in 26(2) (a) of
SEBI (ICDR) Regulations, 2009.

Preparation for Initial Public offer:

1. Selection of Merchant Banker:

2. Restructuring of capital and valuation. An SME needs to transform itself to a public
limited company . First, convert the firm into private limited company. Second, convert
private limited company into public limited company SMEs are also required to restructure
capital so as to comply with Regulations and requirements of raising equity capital through
IPO Valuation of SME needs to be done to arrive at the financial strength of the company as
well as to decide size and pricing of its IPO

3. Offer Document for IPO

4. Due Diligence as part of IPO

Detailed disclosure in Audited Annual Reports on accounts ready, Peer Review by Reputed
Chartered Accountant firms (since its inception or last 5 years, whichever is shorter).
and profile of the company, Promoters & Management, Past Performance of the company,
Risk Factors associated with the Company, External Environment affecting the company
litigations and documenting its magnitude and ramifications background, competition and
business environment

Presented by Prem Mardi

Paper Presentation Competition 2012

NAGPUR CHAPTER of WIRC of ICSI
Material Contract and Agreement must be drafted to enabling as per the provisions of
Memorandum of Association (MoA) and Articles of Association (AoA) for allowed lines of
business, Letters of Contract with each member of issue management team, Loan agreements
and sanction letters with Financial Institutions/Banks.
Deeds of hypothecation /mortgages executed in favour of lenders, Underwriting agreements
Agreement with the Key Management Personnel (KMP), Purchase Orders with major
suppliers All utilities contracts and permissions, Syndicate and Escrow agreement, Promoters
Pledge details.

There is no doubt that with expansion of trading market in our economy, will lead to
escalation effect in Secretarial Professionals.

Presented by Prem Mardi