SME – IPO way forward to create wealth Indian scenario

1. 1 Transition Advisory – Corporate Finance ,Legal & Compliance
Call 9867161367 email:sindulkar@hotmail.com
www.linkedin.com/in/sanjay-harishchandra-indulkar
Sanjay Harishchandra Indulkar
www.linkedin.com/in/sanjay-harishchandra-indulkar
February 1, 2018
Budget 2018 extends sops to MSMEs in push to formalize Indian
economy
Union Budget 2018 proposes to cut corporate tax rate to 25% for
companies with annual revenue of up to Rs250 crore, earmarks Rs3
trillion for 2018-19 under the Mudra scheme
SME – IPO way forward to create wealth
SMEs financing and equity leverage -till now have been looking at debt
options only to raise funds. But, they cannot leverage debt beyond a
point as they exhaust collaterals.
SME exchange will help such companies raise equity capital as the
debt and equity ratio is very important in financial markets
SMEs need money to achieve economies of scale. Amongst various
equity expansions, listing on the exchange is the best since it brings
all classes and types of investors together. Capital market already has
about two crore investors and the SME platform will bring in FII, PE,
VC, angel, HNI, banks, QIBs and the entire gamut of the investment
community. It is a good opportunity to showcase a business model
and gain advantage from it.
Listing on an SME exchange will also attach credentials with a
company. It creates visibility and transparency and, thus, corporate
governance of a company improves manifold.
Opportunities for SME in IPO
There are 26 million SMEs in India, how many would be eligible for
listing on the SME exchange? more than a million SMEs can aspire to
get listed on the exchange within a year or two. However, the
enterprises would have to do a lot of restructuring and documentation
for the IPO process.
Delivery of deliverables
Team With Regulatory, Finance And Capital Market expertise and
experience including marketing of issue available with the network of
best intermediary of SME – IPO process to deliver the end to end
solution in SME- IPO

2. 2 Transition Advisory – Corporate Finance ,Legal & Compliance
Call 9867161367 email:sindulkar@hotmail.com
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News:
https://economictimes.indiatimes.com/markets/ipos/fpos/sme-ipos-make-a-
mark-in-2017-lap-up-record-rs-1785-crore/articleshow/62350699.cms
http://www.thehindubusinessline.com/markets/stock-markets/silly-monks-sme-
ipo-opens-on-jan-5/article10009034.ece
https://timesofindia.indiatimes.com/business/india-business/merchant-banker-
expects-1000-sme-ipos-to-hit-market-in-two-years/articleshow/62417660.cms
http://knnindia.co.in/news/newsdetails/economy/gujarat-leads-sme-ipo-space-
maharashtra-madhya-pradesh-follow
http://www.moneycontrol.com/news/business/ipo/after-a-stellar-2017-15-
companies-in-fray-to-raise-up-to-rs12000-cr-in-2018-prime-database-
2472549.html
Key Take Away For SME IPO
I. Criteria for New Listing
Incorporation - incorporated under the Companies Act
Financials Post Issue Paid up Capital - shall be at least Rs. 3 crore.
Net worth - Rs.3 crore as per the latest audited financial results.
Net Tangible Assets-Crore as per the latest audited financial results.
Track Record -Distributable profits in terms of Section 123 of the
Companies Act 2013 for at least two years out of immediately preceding
three financial years.

3. 3 Transition Advisory – Corporate Finance ,Legal & Compliance
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II. Other Requirements
It is mandatory for a company to have a website.
company to facilitate trading in demat securities
There should not be any change in the promoters of the company in
preceding one year from date of filing the application to exchange
Disclosures -A certificate from the applicant company / promoting
companies stating the on BIFR etc
III. Benefits of Listing
Easy access to Capital .
Enhanced Visibility and Prestige
Encourages Growth of SMEs.
Enables Liquidity for Shareholders
Equity financing through Venture Capital.
Efficient Risk Distribution
FAQs
a) What is the relaxation provided by SEBI for SME IPO? ICDR
Regulations are not applicable to SME IPO:- 6(1), 6(2), 6(3), 7, 8, 9, 10,
25, 26, 27, 49(1).
b) What are the extra conditions which are required to be complied
with in comparison with Main Board listing? 100% underwriting of
the issue. Merchant Bankers need to underwrite 15% from their own
account. Merchant Bankers are required to undertake market making
for a period of 3 years.
c) Whether Grading of IPO is compulsory for listing on SME
Exchange? Regulation 26 is not applicable to SME IPO.
d) What are the preparations before listing on SME Exchange?
Keeping the Annual Reports on accounts ready.
Peer Review by Reputed Chartered Accountant firms (since its
inception or last 3 years, whichever is shorter)
Detailed Disclosures about the Past Performance of the company.
Future Projections of the company (CMA Data) for at least next 3
years.
Infusing 50% independent directors into the Board.
Due diligence on the applicability of various Regulations.
Due diligence (Legal) by reputed Legal firms.
Due Diligence on the various approvals required from Regulatory
Bodies.
Detailed disclosures about the Risk Factors associated with the
company.
Detailed disclosures about the External Environment effecting the
company.

4. 4 Transition Advisory – Corporate Finance ,Legal & Compliance
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Detailed disclosures about the litigations, its magnitude and
ramifications.
Detailed disclosures about the Business activity
Documenting the Material Contracts and Agreements.
Detailed disclosures about the Promoters & Management.
Selection of Investment Banker, Registrar and Transfer Agent (RTA),
Syndicate Member / Sub- Syndicate Members, electronic media and
advertising agency, Escrow Bankers.
Website is mandatory for listing companies.
e) What are the major features of SME Exchange?
All the existing SEBI registered members of the Main Board exchanges
are allowed to participate on the SME exchanges.
Settlement mechanism of T+2days as applicable to the main Board.
Quotes by market makers & Trading system of SME Exchange is
based on BSE Online Trading System (BOLT).
SME performance