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BSE SME Exchange by Aanchal Malhotra
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BSE SME Exchange by Aanchal Malhotra

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  • 1. Year 12 By: Aanchal Malhotra malhotra_aanchal2006@yahoo.co.in
  • 2.  Face value capital between Rs. 1 to Rs.10 Crores An Issuer with face value capital above Rs. 25 Crores has to be necessarily listed on the Main Board of the BSE Track record of distributable profits for 2/3 preceding years. Otherwise, the net-worth should be at least Rs. 3 Crores Net Tangible assets to be at least Rs. 1 Cr. as per latest audited results Net Worth (excluding revaluations reserves) to be at least Rs. 1 Crore 100% underwritten issues. Merchant Banker/s shall underwrite 15% in their own accounts Merchant Banker to the issue shall be responsible for market making* for minimum 3 years through a stock broker who is registered as market maker with SME Platform Minimum IPO size: Minimum 50 investors required while listing IPO; each shall invest Rs. one lakh, amounting to Rs. 50 lakhs* Market makers in scrip will provide 2-way quotes for 75% of the time during a trading day. They will have to hold 5% of the specifiedsecurity to be listed at the time of allotment in their inventory to do the market making. In addition to this, the market makers can also buyfrom or sell to the nominated investors the required shares for market making. The merchant banker and nominated investor need toenter into an agreement in this regard
  • 3.  Separate exchange for SMEs to be operated under SEBI; to provide a platform for fund raising for SMEs SEBI has issued a Circular on May 18, 2010 for setting up a stock exchange having nationwide trading terminals for SMEs A number of SMEs have the potential to grow into big companies, provided they get adequate capital support. The listed SMEs are likely to give better returns on equity for a medium-term to a long-term Needs to transform itself to a public limited company; all existing members of Main Board can participate As per the ICDR Regulations, Company has to offer a minimum of 25% of the post-issue, paid-up capital to the investors BSE’s Main Board has more than 1500 listed companies each of which has paid- up capital of upto Rs. 10 Crores and more than 2500 listed companies each of which has paid-up capital between Rs. 10 Crores and Rs. 25 Crores. These companies may opt to migrate to BSE SME Platform, subject to compliance of applicable provisions
  • 4.  Equity financing opportunities to grow their business – from expansion to acquisitions; lower the Debt burden; working capital Expand investors’ base; secondary equity financing, including private placements Provides immense opportunity for investors to identify and invest in good SME companies at early stage Help unleash the valuation of companies and in the process create wealth for all the stakeholders including investors, besides considerable income tax benefits and facility to exit at any point of time Exit route to venture capitalist; reduction in lock-in period Opens doors to ESOPs/ESPSs Page 4
  • 5.  One of the reasons why Indian investor is abandoning the market is the dilution of the fiduciary trusteeship of promoters raising third party money; promoters take unnecessary advantage of minority investorsSME’s: A different mindset Size of promoters’ assets is comparatively small There shall not be very small investors Greater participation by large and institutional players Low levels of published information will warrant greater interaction with the promoters Time horizon of investment shall be comparatively longer Page 5
  • 6.  Potential for higher growth rates Lower overheads, lower operating leverage Greater adaptability in dynamic business environment Higher probability of abnormal returns in case of takeover by larger companies Greater risks due to low levels of product diversification Lower levels of corporate governance Greater dependence on key management personnel Lower levels of liquidity More prone to excessive speculative activity Page 6
  • 7.  Requirement of 3/5 years profit making track record Net tangible assets of Rs. 1 cr instead of Rs. 3 Crores Net worth of at least Rs. 1 crore in preceding 3 years waived off SEBI approval to DRHP not required Lower initial and annual listing fees Issuer has to take the approval of the Exchange and SEBI’s approval is not required In principle approval from stock exchange is not required; IPO on the BSE SME Platform can be brought in 2-3 months’ vis-à-vis about 8-9 months required for launching an IPO on the Main Board As per ICDR Regulations, grading is not mandatory for listing Instead of quarterly results to be published, listed SMEs can publish half yearly results Companies listed on Regional Stock Exchanges are allowed for direct listing Page 7
  • 8.  Domestic and international investors are inclined to listed SMEs. Listed SMEs are likely to get strategic investments from both, domestic and international investors as well as companies As a listed public limited company, it’s shares can be utilized as an acquisition currency to acquire target companies, instead of a direct cash offering. Using shares for an acquisition can be a tax- efficient and cost- effective vehicle to finance such a transaction (Acquisition by share swap instead of cash) Page 9
  • 9. Company Brief of Business Amount (Rs cr)1. Max Alert Provides solutions for fire fighting, Building 8.0 System Management System2. BCB Finance An NBFC advancing loans and investing/trading in 8.85 securities3. Monarch Health Is in business of Cosmetic Surgery and Skin Care 7.24. Sangam Investment in securities, Corporate Advisory and 5.1 Advisors Investment Banking5. Jupiter A web Infomedia Company with online publications on 4.1 Infomedia Business, Encyclopedia and Yellowpages
  • 10. Engaged in the business of providing Use of Proceeds Setting up crushing plantsolutions for fire fighting, Building IPO Issue Date June 28- July 02,2012Management System and other allied IPO Issue Size Rs. 8 cractivities. The Company’s revenues have Fixed Price issue Rs. 20/sharewitnessed a CAGR of 70.9% over the Fresh Issue 4 mn sharesperiod FY07-FY11. In the same period, PAT  Market Maker: 15%has registered a CAGR of 90% (0.6 mn shares)  Retail: 42.5% (1.7 mn shares)  QIB: 42.5% (1.7 mnFinancials (Rs. 9 mnCr) FY09 FY10 FY11 FY12 Issue structure shares)Total Operating Post issue marketIncome 200 286 331 313 cap Rs. 18.4 crEBDITA % 8% 10% 9% 8% Lead Manager;PAT 15 13 17 12 Market Maker Comfort Securities Ltd.PAT % 7% 5% 5% 3% Shareholding Pattern %Equity Capital 0.1 2.7 9.5 9.5 Pre-issue Post-issueRONW % 7% 4% 3% 1%ROCE % 3% 3% 2% 2% • Promoters andAdjusted EPS 0.01 1.41 1.88 1.86 Promoter Group 100 56P/E at IPO Fixed • Public 44Price 14 11 11 Page 11
  • 11. Incorporated in 2005, Company operate s To augment capital base; as a Non Deposit taking Non-systemically Use of Proceeds for operations Important NBFC engaged in the business IPO Issue Date Feb 23- Feb 27,2012 of advancing loans and investing/trading in IPO Issue Size Rs. 8.85 cr securities. Provides following types of loan: Fixed Price 1. Loan against securities issue Rs. 25/share 2. IPO funding Fresh Issue 2.9 mn shares 3. Unsecured loans/ bridge loans  Market Maker: 22% (0.6 mn shares) Issue structure  Others 78% (2.3mn)Financials (Rs. 6 mn Post issueCr) FY09 FY10 FY11 FY12 market cap Rs. 28.76 crTotal Operating Aryaman FinancialIncome 0.9 1.5 1.5 1.4EBDITA % 28% 27% 33% 21% Lead Manager ServicesPAT -0.3 0.2 0.2 0.1 IKAB Securities &PAT % -33% 13% 13% 6% Market Maker Investment Ltd.Equity Capital 1.6 1.6 1.6 7.9 Shareholding Pattern %RONW -2.9% 2.1% 2.1% 0.8% Pre-issue Post-issueAdjusted EPS -0.4 0.3 0.3 0.2 • Promoters andNAV per share 66 67 69 26 PromoterP/E at IPO FixedPrice 17.6 Group 100 69 • Public 31 Page 12
  • 12.  Incorporated on 1/10/2011, Monarch Health For opening up 23 new Services Ltd is engaged in the business of clinics and meeting the Cosmetic Surgery and Skin Care working capital LOOKS Cosmetic Clinic is a venture of Use of Proceeds requirements Monarch Health Services Pvt Ltd., India’s IPO Issue Size Rs. 7.2 cr first ever prototype clinic with a pioneering Fixed Price concept of "One-stop-shop to cater both issue Rs.40 surgical and non surgical cosmetic and Fresh Issue 1.8 mn aesthetic treatments for head to toe  Market Maker: 16.7% transformations” (0.3 mn shares) 3 mnths revenues for FY12 ending Dec’11 Issue structure  Others 83.3% (1.5 mn) were Rs.0.19 lacs with negative EPS of Post issue Rs.19 market cap Rs. 24 cr Lead Manager Networth Stock Broking & Market Maker Ltd Shareholding Pattern % Pre-issue Post-issue • Promoters and Promoter Group 10 25 • Public 90 75 Page 13
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