This document discusses the process of fundraising through an SME exchange platform. It begins with an overview of the stages of SME fundraising and the chronicle of SME exchanges in India. It then discusses some of the key challenges SMEs face in listing, the benefits of listing, eligibility criteria, and the roles of merchant bankers. It provides details on the listing procedure and getting prepared for listing. It also compares SME exchanges to the main board and discusses important post-listing considerations like corporate governance. Finally, it outlines the typical stages involved in an SME IPO process.

1. Fundraising through
SME Exchange Platform
January, 2016
SUMEDHA FISCAL SERVICES LTD.

2. Presentation Structure

3. Presentation Structure
 SME Fund raising stages
 SME Exchange .. the chronicle
 The blocked mindset challenge
 Benefits of listing
 General tax benefits
 Criteria for listing
 Other criteria
 Listing procedure
 Getting prepared for listing
 Role of merchant banker
 Merchant Banker’s role in market making
 SME exchange … benefits over main
board
 Corporate Governance Issue
 Hostile takeover
 Companies in NSE Emerge platform
 Stages of IPO
 Listing Timelines
 Institutional Trading Platform

4. SME Fund Raising Stages
Revenue
Development Stage
Pre Seed Phase > Seed Phase > Start-up Phase > Emerging Growth > Development
Promoters Funding
Venture Capital/Private
Equity
SME IPO
Migrate to main Board

5. SME Exchange .. the chronicle
January 2010 – The Prime Minister’s Task Force recommended to set-up dedicated
Stock Exchanges/Platform for SME .
To facilitate the same , the market regulator SEBI made significant amendments in the
SEBI (ICDR) regulations, 2009 . Subsequently SEBI also amended the following
Regulations in order to facilitate the SME IPO.
 SEBI (Merchant Bankers) Regulations, 1992;
 SEBI (Foreign Institutional Investors) Regulations, 1995;
 SEBI (Venture Capital Funds) Regulations, 1996;
 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations; and
 SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

6. SME Exchange .. the chronicle
 Both BSE and NSE begun their SME exchange platform in 2012 (BSE SME –
March 2012 and NSE’s SME Exchange EMERGE – September 2012).
 Till date (2nd September, 2015) 114 SMEs raised funds using SME exchange
platform, BSE SME: 107 and EMERGE: 7 (excluding ITP platform).
 8 SMEs migrated to Main Board out of 114 SMEs raised funds, BSE : 7 and NSE: 1
 Till date (2nd September, 2015) 42 companies listed on ITP, BSE SME: 21 and
EMERGE: 21

7. The blocked mindset challenge..
Mindset of ‘me rather we’
Small and medium companies still have the mindset of ‘me rather we or Company’. This
concept needs to change. It is recommended to think universal while going to public.
Equity dilution – fear on loss of control
Despite having solid growth potential, the managements of privately-held SMEs often
remain wedded to the status quo and are wary of new management perspectives and
fresh growth capital. Their fears on loss of control and equity continue to dominate
strategic decision-making.
Focus needs to be changed from..
Governing to governance
Ownership to sharing
Tax savings to tax paying
Owners to all stakeholders; ultimately stake holders are the most important par of any
organization and they are to be paid back positively.
Focus should be on wealth creation for all
It is transformation of promoters, preparedness for transparency, shared decision
making and compliance.

8. Benefits of Listing
Help to raise the required
funds for -
 Business Expansion
 Geographical
Expansion
 Diversification
 Acquisition
Infusion of equity will help
company to raise
borrowed debts at
efficient rate; which is also
required for the expansion
Fund raising through
exchange will balance
company’s leverage
structure leading to
healthier balance sheet
Listing will also help to
generate an independent
valuation of the company
by the market
Listing will raise
company’s public profile
with customers, suppliers,
investors, financial
institutions and the media
Once listed on SME
Exchange, a company
can anytime migrate to
the main Board of
BSE/NSE provided
shareholders approval is
accorded

9. General Tax Benefits
Zero long term capital gain tax / limited short term capital gain tax
In general, transfer of unlisted shares attracts long term capital gain at the rate of
20%. While a company is listed in SME exchange, the same rate is ‘Nil’. The same
unlisted transaction attracts a short term capital gain tax upto 30%. In case of SME
exchange, the same has been reduced to 15%. However STT is applicable on listed
securities.
Zero tax on distress business purchase
Acquisition of distress asset, where value is less than its book value, could attract
heavy tax. However such a tax liability does not attract if company’s shares are listed
on a recognized stock exchanges including SME Exchange.
Zero tax on fresh equity infusion
Compared to unlisted company, fresh issuance of equity shares in listed company
does not attract equity infusion tax even the issuance is made at a value more than
the fair value.

10. Criteria for Listing
Requirements
1. Post Issue paid up capital - has to be less than Rs 2500 Lakh
2. Track record has to be more than 3 years
3. EBDT - should be positive for at least 2 preceding years
4. Net worth -should be positive for at least 2 preceding years
5. BIFR
Should not be reported
6 Winding up petition
Should not have any such case
7. Regulatory / disciplinary action by any regulator - past 3 years
Should not have any such case

11. Other Criteria
 Minimum number of members for Issue – 50
 Market making by merchant banker- mandatory for 3 years
 Underwriting - 100% (Merchant bankers to underwrite 15% in own account)
 The company shall mandatorily facilitate trading in demat securities and enter
into an agreement with both the depositories
 Companies shall mandatorily have a website
 No change in promoters in preceding one year from the date of filling the
application of listing
 The minimum application size in IPO in terms of no. of specified securities and
trading lot size shall not be less than Rs. 1,00,000.

12. Listing Procedure
Selection of
Merchant Banker
Structuring of
Capital and
Valuations
Due Diligence &
Pre-IPO
preparation
Preparation of
Offer Document
Appointment of
other
intermediaries
Marketing Strategy
Filling of Offer
Document
with Stock
Exchange &
Others
Issue Launch/
Allocation
Listing/Post listing
activities/ Market
Making

13. Getting prepared for Listing
Important disclosures/documents requirements
 Audited annual accounts
 Peer review by a Chartered Accountant firm
 Appointment of full time company secretary
 Appointment of 50% independent directors into the board
 Due diligence on the applicability of various Regulations
 Disclosure about – risk factor/external environment/ litigation/ business activities/others
 Objects of the issue and issue structure
 Future plan and strategy
 Management discussion and analysis of the financial results

14. Role of Merchant Banker
Assisting company regarding regulatory aspect of the issue
A merchant banker informs and shares company about capital market rules &
regulations, the IPO process and post listing requirements.
Due diligence & DRHP Preparation
Merchant banker would be closely associated in preparing the new applicant's
prospectus and other related listing documents. Merchant banker conducts a due
diligence on the applicant and provide due diligence certificate as per Form A of
Schedule VI of the ICDR including additional confirmations as provided in Form H of
Schedule VI along with the offer document to the exchange.
Display of offer document on website
Merchant bankers display the offer document on its website after the final approval is
obtained and the RHP is filed with RoC and SEBI

15. Role of Merchant Banker
Market making arrangement
Merchant bankers ensure compulsory market making through the stock brokers of SME
exchange in the manner specified by the Board in chapter XB, for a minimum period of
three years from the date of listing of specified securities on SME exchange.
Underwriting arrangement
Merchant bankers ensure that the issue is 100% underwritten and 15% of the
underwriting should be by the merchant banker in own books.
Arrangement with nominated investors
In terms of provisions of Chapter XB of the ICDR, Merchant Banker could enter into
arrangements with nominated investors (PE funds & QIBs as defined therein) for
facilitating market making and underwriting. Merchant bankers disclose its arrangements
with Nominated investors to the exchange in the Final Offer document.

16. Merchant bankers’ role in market making...
Merchant bankers to the issue undertake market making through a stock broker who is
registered as market maker with the NSE Emerge Platform
Merchant bankers are responsible for market making for a minimum period of 3 years
Market Maker provide two way quotes for 75% of the time in a day. The same shall be
monitored by the exchange
Other information related to market making: Maximum number of market maker is limited to 5 and they can
compete with each other. The exchange shall prescribe the minimum spread between the bid and ask price.
Marker maker can de-register itself by giving one month’s notice.
Restriction/limitation:
 Market maker shall not buy shares from promoters or persons belonging to the promoter group
for any person who has accepted shares from such promoter or promoter group during the
compulsory market making period.
 Promoter cannot offer their holdings to the market maker during the compulsory market making
period, however promoters holding which is not locked-in can be traded with prior permission
of the SME exchange in manner specified by SEBI.
 Takeover regulations are not applicable to the market maker for a period of three years from the
date of listing.

17. SME exchange...benefits over main board..
Lower time frame for listing
In SME Exchange getting listed takes less time compare to listing on main board
Limited number of allotees
In main board of BSE and NSE the minimum number of allotees is 1000 where as in the SME exchange the
same requirement is only 50.
Display of offer document on website
A merchant banker displays the offer document on its website after the final approval is obtained and the RHP
is filed with RoC and SEBI
Relaxation on post issue capital
In the SME exchange the post issue capital requirement is any amount less than Rs. 25 crore where as in the
main board the minimum post issue capital requirement is Rs. 10 crore.
Limited intervention by the market regulator SEBI
In SME platform, the exchange plays pivotal role under observation of SEBI, where as in the main board SEBI
plays much broader role. Reporting requirements are also limited in SME exchange compared to main board.
Migration to main board
Once listed on SME platform, a company can migrate to the main board at any point of time after two years of
listing (after fulfilling certain conditions)
Which
exchange?
SME Exchange Main BoardSME or Main Board
Rs. 1-10 crore Rs. 10-25 crore Above Rs. 25 crorePost issue paid-up capital

18. Corporate Governance
 Companies Act, 2013
 Listing Agreement applicable for SMEs
 Exchange listing norms
 SEBI ICDR Regulations
 SEBI other regulations like SAST, Insider Trading
Statutory compliance management and minimum
Corporate Governance practices to be followed in
perspective of the following Rules/ Regulations

19. Corporate Governance
 Board of Directors should be comprised of optimum
combination of executive and director with not less than 50%
of directors comprising of non-executive directors. If the
Chairman is an executive director or belongs to promoter
group, half of the Board should comprise of independent
directors.
 Audit Committee shall have minimum three members, all
being non-executive directors, with the majority of them
being independent, and with at least one director having
financial and accounting knowledge.
 The audit committee shall meet four times in a year. One
meeting shall be held before finalization of annual accounts.
Norms for listed companies

20. Corporate Governance
 Related party transactions
 Disclosure of accounting treatment
 Risk management
 Remuneration & shareholders related disclosures
Disclosures
Annual CEO/CFO certification to board
 Review of financial statements
 Accepts responsibility for internal controls
 Intimation to auditor and audit committee regarding
significant changes, instance of fraud etc

21. Corporate Governance
 Company shall submit Half Yearly Results (Audit/ Limited
Review) and Half Yearly Shareholding pattern
 Annual report shall contain a separate section containing the
corporate governance report
Report on corporate governance
Compliance certificate
 Company shall obtain a certificate from Auditors of the
Company or Practicing Company Secretary regarding
compliance of conditions of corporate governance

22. Post Listing Threats &
Takeovers
 Compliance with Listing Agreement.
 Compliance with SEBI Insider Trading Regulations.
 Compliance with other SEBI Regulations and SCRA.
 SEBI (Substantial Acquisition of Shares & Takeovers)
Regulations, 2011
 Creeping acquisitions.
 Compulsory and voluntary open offer.

23. Companies in NSE Emerge platform..
Source: www.nseindia.com, Capital Market Database* Bonus in the ratio1:1
** Migrated to Main Board
Unit Sanco Opal Veto** Thejo Mitcon Momai
Suprem
e
Issue size
Rs
Lakhs
432 1300 2500 1901 2501 3000 787.20
Dilution – post
issue capital
% 28 29.77 30.01 27.54 33.88 25.15 25.37
Total applicants No. 223 129 1053 1,321 135 2643 374
Issue type
Fixed
Price
Book
Building
Book
Buildin
g
Book
Building
Fixed
Price
Book
Building
Fixed
Price
Issue price
Rs/shar
e
18 130 50 402 61 78 60.00
P/E 3.70 5.73 8.06 5.28 4.89 3.15 4.30
LTP (02.09.2015)
Rs/shar
e
22.30 112.00 72.00 210.00* 74.85 90.00 68.30
Listing price
Rs/shar
e
19 130 58 403 60 78 62
Over-subscription Times 1.46 1 1.54 1.46 0.9371 1.62 1.66

24. Companies in NSE Emerge platform..
Company
Pre IPO
Post IPO
As on 31.03.2014
Year
Sales
(Rs. In
Crs.)
PAT
(Rs. In
Crs.)
Sales
(Rs. In Crs.)
PAT
(Rs. In
Crs.)
Sanco Ind. Ltd.
2013 58.53 3.00 66.23 1.40
Opal Luxury Time Products
Ltd.
2012 17.21 2.83 24.99 0.48
Veto Switchgears & Cables
Ltd.
2012 68.60 7.22 94.35 6.09
Thejo Engineering Ltd. 2012 115.36 9.02 148.86 8.96
MITCON Cons. & Eng. Serv.
Ltd.
2013 46.67 9.97 40.49 7.09
Source: www.nseindia.com, Capital Market Database

25. Stage – I : Conception & Capital Structuring
Assist in preparing for IPO and listing on SME Exchange towards:
 Advising appropriate capital structuring
 Statutory compliance management & effective corporate governance
practices
 Appointment of market intermediaries and other parties like
Underwriters
Market Makers
Registrar to the Issue
Bankers to Issue
PR Agency, Printer, etc.
 Devising a complete IPO plan and strategy including the likely post-
issue shareholding pattern

26. Stage – II : Due Diligence & DRHP preparation
Drafting of Offer Document and other important agreements, documents and
resolutions necessary for an SME IPO. An indicative list is as follows:
 IPO Offer Document
 Tripartite Agreement with NSDL, CDSL and Registrar to the Issue
 Underwriting Agreement
 Market Making Agreement
 Agreement with Bankers/ Registrar to the Issue
 Board/ Shareholders Resolution
 Certificates, Declaration, Letters of Representations etc.
 Forms / Applications to be filed with SE, ROC and other Regulatory
Office
Due Diligence spans the entire IPO process. The broader steps involved in due
diligence exercise:
 Decision on Public Issue
 Business due diligence
 Legal & Financial due diligence
 Due diligence on the applicability of various Regulations
 Disclosures in Prospectus

27. Stage – III : Offer Management
Under this stage following activity will be done considering drafting of Offer
Document and other important agreements, documents and resolutions etc.
 Filing of IPO Offer Document with SE, SEBI & ROC
 Follow-up with SE and ROC for their approvals
 Assistance in launch of IPO and coordinate with other parties including PR
Agency, printers for adequate advertisement, application forms as required
statutorily
 Discussion and meeting with the informed investors, Institutions, PEs, VCs, etc.
Monitoring the flow of applications and keeping a real-time discussion with the
management of the Issuer Company
Coordinating with bankers and registrars for deposit of application money and
finalisation of allotment list in consultation with stock exchange.

28. Stage – IV : Post IPO
Under this stage towards listing of equity shares, our role shall include the
following.
 Assistance in completing allotment of shares to the successful allotees.
 Preparing listing application
 Filing of listing application with Stock Exchange (SE)
 Follow-up with SE and obtain listing approval
 Assist in trading formalities and obtain SE trading approval
 Assist in making required public disclosures required statutorily
 Coordinating for continuous market making for 3 years

29. Listing timeline..
Sr. No. Procedure Timeline
1 Conversion of Company into Public Limited Company, if applicable X
2 Preparation of Documents for conversion and submission to ROC for approval i.e. Alteration of
Memorandum, Articles & filing of necessary forms for appointment of aforesaid directors
X+5
3 ROC approval accorded for conversion X+7
4 Identification & appointment of Registrar & Transfer Agents & Submission of Master Creation
forms with NSDL, CDSL for establishing connectivity
X+7
5 Appointment of Managing Director, Whole Time Director, Independent Directors, Company
Secretary & deciding about their remuneration, sitting fees etc.
X+12
6 Constitution of committees - Audit, Shareholder Grievance, Remuneration etc. As per SME
Listing Agreement
X+15
7 Preparation of website of the Company & hosting code of conduct on the website X+18
8 Signing of Tri-Partite Agreement with NSDL & CDSL and receipt of ISIN X+18
9 Identification & appointment of peer review auditors & getting the financials of last 5 years
restated and for last 1 year re-audited from peer review auditors as per SEBI (ICDR)
Regulations, 2009
X+18
10 Appointment of Merchant Banker & Market Maker X+18
Cont..

30. Listing timeline..
Sr. No. Procedure Timeline
11 Preparation of Project Report and Red Herring Prospectus (RHP) X+35
12 Filing of Red Herring Prospectus (RHP) with stock exchange & SEBI (only for hosting) along
with application for in-principle approval with stock exchange
X+35
13 Clearance from stock exchange X+65
14 Filing of Red Herring Prospectus (RHP) with ROC & getting it cleared from ROC X+70
15 Filing of Final Prospectus with Stock exchange and SEBI X+75
16 Opening of the Issue X+80
17 Closing of the Issue X+83
18 Allotment of shares X+90
19 Filing of listing application with Stock exchange X+93
20 Receipt of listing approval from Stock exchange X+95
21 Filing of corporate action form with NSDL & CDSL and demat credit of shares X+96
22 Filing of trading application with Stock exchange X+98
23 Receipt of trading approval from Stock exchange X+100

31. Institutional Trading Platform (ITP)..
 A trading platform for early stage venture to list with or without
IPO.
 Limited lock in of promoter's capital (only 6 months vs 3 yrs in
IPO).
 Limited disclosure requirement.
 Can migrate to main board after 3 years.
 Restricted for HNIs and Institutional Investors.

32. ITP-Eligibility
For Tech, IT, Bio-tech, Nano-Tech,
Analytic and Intellectual Property
– at least 25% of the pre issue
capital with Qualified
Institutional Investors.
Any other entity - 50% pre issue
capital with Qualified
Institutional Investors.
No person, individually or
collectively with PAC, shall hold
25% or more of the post issue
share capital
No profit/turnover requirement

33. Relaxation
No profit trach record required Flexible issue price justification
Offer proceeds can be used for
general purpose
Migration to Main Board after 3
years

34. ITP - Disclosure requirements
Only for Listing
 Filing of Draft Information Document with SEBI for approval along with
fees.
 In-principal approval from the recognised stock exchange.
 Disclosure related to issue pricing.
 To list within 30 days after SEBI approval.
For IPO
 DRHP filing to SEBI with specified fees.
 Minimum application – Rs. 10 Lacs
 Number of Allottees - to be more than 200
 Allocation – 75% to Institutional Investors & 25% to Non-institutional.
 Allotment – Discretionary up to 10% of the Issue Size to one Institutional
Investor or proportionate to any level & proportionate to Non-
institutional Investor

35. ITP – Lock in and exit options
Lock in
Entire pre-issue capital of the shareholders shall be locked-in for a period
of 6 months from the date of listing with following relaxation:
• ESOP/ESOS
• Shares purchase by VC, foreign VC, alternative investment fund – whose
investment is locked in for a period of at-least one year from the date of
purchase.
• Equity shares held by persons other than promoters, continuously for a
period of at least 1one year prior to the date of listing in case listing with
public issue.
Exit Option
• Special resolution by postal ballot where 90% of the total votes and the
majority of non-promoter votes have been cast in favour of such
proposal.
• Exchange permission.

36. Team Sumedha
Ms. Moumita Chowdhury is based out of Kolkata and takes care of execution of debt related
mandates such as techno economic feasibility studies, restructuring, due diligence and
valuation.
Ms. Sudeshna Agarwal is situated out of Kolkata and manages the Execution Desk for all debt
related proposals. Her domain area includes project appraisal, risk analysis, evaluation of
proposals, relationship management, compliance and due diligence for deal execution.
Reach Us

37. Contact us
AHMEDABAD
A/82 Pariseema Complex, Opp. IFCI Bhawan,
C.G. Road , Ahmedabad – 380 009
Telephone: +91 79 3002 3337 / 6605 2957
Fax: +91 79 2646 0394
Email: ahmedabad@sumedhafiscal.com
Contact : Mr. K. K. Kabra
BANGALORE
“Park Plaza”, 1st Floor, No. 1 Park
Road, (Off. Infantry Road), Tasker
Town,
Bangalore – 560 051
Telephone: +91 80 4124 2545 / 2546
Fax: + 91 80 4124 2547
Email: bangalore@sumedhafiscal.com
Contact: Mr. Anil Birla
HYDERABAD
309/1, 3 rd Floor, Krishna Plaza,
Khairatabad, Hyderabad-500 004
Telephone: +91 40 4020 2826 / 4026
7272
Fax: +91 40 4020 2826
Email: hyderabad@sumedhafiscal.com
Contact : Mr. M .S. Prashant
NEW DELHI
B1/12 Safdarjung Enclave,2nd Floor,
New Delhi – 110 029
Telephone: +91 11 4165 4481 / 82
Fax: +91 11 4165 4483
Email: delhi@sumedhafiscal.com
Contact : Mr. Gaurav Gaggar
MUMBAI
C-703 "Marathon Innova",
Off Ganapatrao Kadam Marg,
Opp. Peninsula Corporate Park,
Lower Parel (W) , Mumbai - 400 013
Telephone: +91 22 4033 2400
Fax: +91 22 2498 2878
Email: mumbai@sumedhafiscal.com
Contact: Mr. B.S. Rathi
Registered & Corporate Office
KOLKATA
8B Middleton Street, 6A Geetanjali,
Kolkata – 700 071
Telephone: +91 33 2229 8936 / 6758 / 3237 / 4473
Fax: +91 33 2226 4140 / 2265 5830
Email: kolkata@sumedhafiscal.com
Contact : Mr. Vijay Maheshwari / Mr. Bijay Murmuria
CIN: L70101WB1989PLC047465

38. Thank You