Published on February 25, 2014
SME Listing CA Mehul Mukati Axia Advisory Services Pvt Ltd
Disclaimer 2 • This presentation is intended only for information and is not and cannot to be construed as legal advice. • Axia Advisory Services Pvt Ltd, the author or any of its affiliates cannot be held liable for any action take on the basis of this presentation. Axia Advisory Services Pvt Ltd
Background 3 • BSE and NSE two leading platforms for stock exchanges • Their present listing norms make it difficult for MSMEs to raise growth capital [equity] from public at large Axia Advisory Services Pvt Ltd
Post-Issue Paid-Up Equity 4 <₨10 cr SME Board ₨10-25 cr >₨25 cr Option Main Board This is Post-Issue Paid-Up Equity Capital and NOT • the Net Worth • the present Paid-Up or Authorised Equity Capital Axia Advisory Services Pvt Ltd
Other Guidelines 5 • Underwriting – Mandatory for full issue, i.e. 100% – Merchant Bankers to underwrite 15% on own account • Market Making mandatory – For a period of 3 years after listing • Min 50 investors required – Not a continuous requirement Axia Advisory Services Pvt Ltd
Other Post-Listing Points 6 • Application and trading lot size is ₨1 lakh – to curtail entry of retail investors • Minimum depth to be of ₨1 lakh • Investors holding with value less than ₨1 lakh allowed to offer their holding to the market maker in one lot Axia Advisory Services Pvt Ltd
IPO Mode 7 • IPO can be made through the – fixed price method – book building method or – combination of both • Fixed Price Method – Issuer pre-decides issue price • Book Building Method – Issuer pre-decides issue price band – Issue Price determined by investor interest, i.e. open auction within price band Axia Advisory Services Pvt Ltd
BSE – Key Listing Criteria 8 Net Worth • Min Tangible Net Worth of ₨1 crore* • Exclude revaluati on reserves Profits • Distributable profits (s.205 CA’56) in at least 2 of past 3 FY • Year = 12m • EOI to be ignored *as per latest audited annual report Axia Advisory Services Pvt Ltd Additional Net Worth • If profit criteria is not met, NW ≥ ₨3 crore
BSE – Key Listing Criteria 9 • Post-Issue paid-up capital to be at least ₨1 crore – Max paid-up capital: ₨25 crore • Other requirements – Only demat shares • Min 50% of public shareholding in demat – Company website • Promoters to be interviewed by BSE’s Listing Advisory Committee Axia Advisory Services Pvt Ltd
BSE – Key Listing Criteria 10 • Certificate from applicant / promoters that – Company is not referred to BIFR • Companies out of BIFR are not allowed – No winding up petition accepted by a court • Promoters’ to be interviewed by the Listing Advisory Committee Axia Advisory Services Pvt Ltd
BSE – Fees 11 • One-Time Listing Fee: ₨50,000 • Annual Fee based on Market Cap <= Rs50 crores >Rs50 crores ₨25,000 ₨50,000 • Use of Book Building Software (based on Issue Size) <= Rs25 crores > Rs25 crores ₨2.5 lakhs ₨4.0 lakhs Axia Advisory Services Pvt Ltd
Preparatory 12 • • • • • Financials Secretarial Corporate Governance Disclosures Others Axia Advisory Services Pvt Ltd
Preparatory – Financials 13 • Minimum past 3 years – Detailed financials to be provided • Comparable – Restatement may be required • Group brief financials • Minimum equity capital / net-worth requirement Axia Advisory Services Pvt Ltd
Preparatory – Secretarial 14 • • • • Board Meeting Authority and Delegation AGM / SGM Banking – Accounts – Loans • Expansion – Board discussions – Financial viability / forecasts Axia Advisory Services Pvt Ltd
Preparatory - Corp Governance 15 • Independent Directors • Committees of Board – Audit – Remuneration – Shareholder Grievance • CV of all promoters – Including certificates, if applicable Axia Advisory Services Pvt Ltd
Preparatory – IPO Disclosures 16 • Financials of all group entities – Companies – Partnerships – HUF – Proprietary • List of Family of Promoters • Key Management Personnel Axia Advisory Services Pvt Ltd
Post IPO Disclosures 17 • Results Declaration – SME Exchange Half-Yearly • Need not publish financial results – can make it available on their website • Announcements for all major events • Purchase / Sale of company shares by promoters / management • May send to shareholders – statement of salient features of all documents [proviso to s.219(b)(iv) CA, 1956] instead of full Annual Report Axia Advisory Services Pvt Ltd
Others 18 • Shares to be mandatorily in dematerialised form – Registrar and Share Transfer Agent – Depository • Detailed listing of all ongoing litigation – Labour / suppliers / clients / etc Axia Advisory Services Pvt Ltd
Preparatory Checklist – 1 / 4 19 • Keeping Annual Reports on accounts ready • Detailed Disclosures about the past financial performance • Future Projections (CMA Data) for at least next 3 years • Conversion of private limited company to public limited • Appointing full time company secretary (Compliance Officer) • 50% independent directors Axia Advisory Services Pvt Ltd
Preparatory Checklist – 2 / 4 20 • Due diligence on the applicability of various Regulations • Due diligence (Legal) by Legal firms • Due Diligence on the various approvals required from Regulatory Bodies • Detailed disclosures about the Promoters & Management Axia Advisory Services Pvt Ltd
Preparatory Checklist – 3 / 4 21 • Detailed disclosures about the Risk Factors • Detailed disclosures about the External Environment effecting the company • Detailed disclosures about the litigations, its magnitude and ramifications • Detailed disclosures about the Business activity • Documenting the Material Contracts and Agreements Axia Advisory Services Pvt Ltd
Preparatory Checklist – 4 / 4 22 • Selection of – Investment Banker – Registrar and Transfer Agent (RTA) – Syndicate Member – Escrow Bankers – electronic media and – advertising agency * Not full list, only indicative Axia Advisory Services Pvt Ltd
Listing Process 23 Convert to Public Limited (X) Conversion doc’s to ROC - MoA / AoA, etc (X+5) ROC Approval for Conversion (X+7) Appointment of RTA (X+7 / X) Appointment of MD, WTD, ID, CS (X+12) Appointment of MB / MM (X+18) Peer review auditors + Restated financials (X+18) Tri-Partite Agreement: NSDL & CDSL (X+18) Preparation of website (X+18) Constitution of Committees (X+15) Preparation of Project Report and RHP (X+35) RHP to SE/SEBI (X+35) Clearance from SE (X+65) Filing of RHP with ROC + ROC clearance (X+70) Final Prospectus to SE / SEBI (X+75) Listing approval from SE (X+95) Listing Application with SE (X+93) Allotment of Shares (X+90) Closing of the Issue (X+83) Opening of the Issue (X+80) Demat credit of shares (X+96) Trading Application to SE (X+98) Trading Approval from SE (X+100) Axia Advisory Services Pvt Ltd
Obligations of Market Makers 24 • Merchant Bankers – to undertake market making through eligible stock brokers – responsible for market making for min 3 years • MMs to provide 2-way quote for 75% of daily time • Market makers to compete with each other • Exchange to prescribe min spread between bid / ask price • Promoter holding not eligible market making • Market Maker to hold min. 5% of issue size on date of listing • Max 5 market makers Axia Advisory Services Pvt Ltd
Thank You CA Mehul Mukati Director, Axia Advisory Services Pvt Ltd firstname.lastname@example.org Axia Advisory Services Pvt Ltd
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