Download Bombay Stock Exchange Limited

Bombay Stock Exchange Ltd.
BSE SME Platform-Corporate Presentation
Table of Contents (1 of 2)
Section
Contents
Page
A
About SME Industry
4
B
SME Exchange-SEBI Guidelines
8
C
Eligibility Criteria
10
D
Migration from SME Board to Main Board
13
E
Benefits of Listing
16
F
Key Statistics
18
2
Table of Contents (2 of 2)
Section
Contents
Page
G
Institutional Trading Platform-Introduction
21
H
Eligibility Criteria
23
I
Listing of Specified Securities
27
J
Exit Options
33
K
Thank you
35
3
A.
About SME Industry
4
About SME Industry
 Micro, Small and Medium Enterprises (MSMEs) contribute
- 8% of the country's GDP
- 45% of the manufactured output
- 40% of our exports
 Provide employment to about 7.5 cr. people through 4 cr. enterprises.
 The Micro Small and Medium Enterprise (MSME) sector forms the largest
generator of employment in the Indian economy.
 The MSME sector forms a major portion of the industrial activity and produce
7000 different products.
5
SMEs rely on informal sources of capital
Historically SMEs have struggled to access capital
Adequate access to finance is crucial for
SMEs to survive and eventually grow
beyond their SME Status
Own
SMEs
“ In India, the reality is that SMEs have
Others
Large Corporations
poor access to finance”
Family & Friends
Banking Institutions
Development Financial
Institutions
0%
10%
20%
30%
40%
50%
“the average SME relies mostly on its
own capital and/or informal borrowing
from friends and family members for
start-up funds and working capital”
6
Formal SME financing in India presents hosts of challenges
SME universe is diverse. No one
size fits all solution
Institutional funding sources
typically target process driven
scalable opportunities
Poor information, fragile systems ,
weak control/corporate governance
Difficult to assess and analyse via a
template approach/standard format
Apart from Capital , lack of
management resources and
bandwidth
Institutional funding sources not
equipped to address. Low return on
effort for pure debt financing
Consequently banking institutions gravitate towards collateral based financing
7
J.
Need for SME Exchange
Need for SME Exchange
 Provide the SMEs with equity financing opportunities to grow their business –
from expansion to acquisition
 Equity Financing will lower the Debt burden leading to lower financing cost and
healthier balance sheet
 Expand the investors base, which in turn will help in getting secondary equity
financing, including private placement
 Enhance company’s visibility. Media coverage can provide SME with greater
profile and credibility leading to increase in the value of its shares
 Incentives for greater venture capital participation by providing an exit option
thus reducing their lock-in period
9
Need for SME Exchange
 Greater incentive for the employees as they can participate in the ownership of
the company and benefit from being its shareholders
 Encourage innovation and entrepreneurial spirit
 Capital Market will help distribute risk more efficiently
by transfer of risk to those, who are best able to bear it
 SME sector will grow better on two pillars of Financial system
i.e. Banking and Capital Market
Initiating a dedicated Stock Exchange for SMEs’ will lead to mobilization of the
diversified resources of finance and build a bridge between the SMEs, Private
Equity and the Venture Capital by providing an exit route.
10
B.
SME Exchange-SEBI Guidelines
11
SME Exchange – SEBI Guidelines
 Issuer with post issue face value capital up to Rs.10 crores shall be covered under the
SME Platform, Issuer with post issue face value capital between Rs.10 – 25 crores may
get listed at SME Platform and Issue with post issue face value capital above Rs.25
crores has to necessarily listed at main board of the Exchanges
 Suitable provisions for migration to/ from main board
 The minimum application amount as well as minimum trading lot shall not be less
than Rs.1,00,000/ All existing Trading Members would be eligible to participate in SME exchange
without any further registration
 100% underwritten issues and Merchant Banker/s shall underwrite 15% in their own
account
 The Merchant Banker to the issue will undertake market making through a stock
broker who is registered as market maker with SME Exchange. The Merchant Banker
shall be responsible for market making for a minimum period of 3 years
12
C.
Eligibility Criteria
13
Eligibility Criteria
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.
Otherwise, the networth shall be at least Rs 3 Crores.
14
Eligibility Criteria
4.Other Requirements
The post-issue paid up capital of the company shall be at least Rs. 1 crores
The company shall mandatorily facilitate trading in demat securities and enter
into an agreement with both the depositories.
Companies shall mandatorily have a website.
There should have been no change in the promoters of the Company in the one
year preceding the date of filing application to BSE for listing on SME segment.
5.
Certificate from the applicant company / promoting companies stating the
following:
6.
a. The Company has not been referred to the Board for Industrial and
Financial Reconstruction (BIFR).
Note: Cases where company is out of BIFR are allowed.
b. There is no winding up petition against the company that has been
accepted by a court.
15
D.
Migration from SME Board to Main Board
16
How different from Main Board ?
 The Compliance norms are simplified. Half yearly compliance is required instead
of quarterly compliance.
 The abridged version of the annual reports need to be sent to the investors
instead of the entire annual report and posting the soft copy of the report on the
website is sufficient.
 The issue expenses will be minimal on the marketing and stationery. However, the
issue will be charged for underwriting, sub-underwriting and responsibility of
three years market making.
 Market making is compulsory for 3 years, unlike on main platform.
 Listing fees on BSE SME platform are minimal compared to the main board.
 The SMEs with the paid up capital between Rs. 10 crores and Rs. 25 crores has the
option to get listed either on main board or on the SME Exchange.
17
Migration from SME Platform to Main Board

Any SME on BSE SME Platform having a paid up capital more than Rs. 10 crores
can move to the main board provided that the special resolution is passed in the
AGM in favor with at least two third of the number of votes cast by shareholders
other than promoter shareholders and then apply to BSE SME.
 The SME migrating to the main board has to comply with all the main board norms
like minimum 500 investors, pay main board listing fees and do the quarterly
compliance etc.
18
E.
Benefits of Listing
19
Benefits of Listing
 Facilitate capital raising by small and medium enterprises including start-up
companies which are in their early stages of growth
 Provide easier entry and exit options for informed investors like angel investors,
VCFs and PEs etc., to and from such companies
 Encouragement in innovation and entrepreneurial spirits in addition to facilitating
growth through Mergers and Acquisitions
 Relaxed compliance and cost effective listing
 Equity Financing will lower the Debt burden leading to lower financing cost and
healthier balance sheet
 Expand the investors base, which in turn will help in getting secondary equity
financing, including private placement
 Enhance company’s visibility. Media coverage can provide SME with greater profile
and credibility leading to increase in the value of its shares
20
F.
Key Statistics
21
Statistics
12
11
10
8
9
9
Q2'14
Q3'14
7
6
4
2
0
Q1'14
Q4'14

Number of companies listed so far =79,

No. of companies where approval has been given – 10/ No. of companies where DRHPs have been filed and waiting for
approval – 9

Total funds raised by 63 companies – 630Crores

Total Market Capitalisation-9700 Crores

Number of Market Makers registered with BSE SME – 86

SME IPO index launched on 14th December 2012 with 100 as base (Value as on 3rd December 2014 –1100)

Research reports are being published once the company gets listed
22
Sectoral Distribution of the Companies
5%
3%
Food Processing and Agricultural
Products
Financial Services
3%
5%
7%
Textiles
Apparels & Accessories
14%
10%
Construction and Engineering
Healthcare
7%
5%
Distribution & Trading
Real-Estate
5%
Others
Advisory Services
14%
IT and Technology
19%
2%
Movies and Entertainment
Transportation & Logistics
23
G.
Institutional Trading Platform-Introduction
24
Introduction
SEBI has notified the guideline on ITP on 8th October,2013 and came out with
the circular on 24th October, 2013
Applicability (106 W)
 Apply to small and medium enterprises which do not have their securities listed
on any recognised stock exchange and which seek listing of their specified
securities exclusively on the ITP
Definition(106 X)
 Institutional Trading Platform means the trading platform in SME for Listing and
trading of Specified Securities of Small and Medium Enterprises for Informed
Investors
 “Small and Medium enterprise" means a public company including start-up
company, that complies with all the eligibility conditions specified in regulation
106Y.”
BSE-SME Institutional Trading Platform
25
H.
Eligibility Criteria-Institutional Trading
Platform
26
Eligibility Criteria(106 Y)
Qualitative Factors
Quantitative Factors





Company/promoter/group Company or
Director not to be in the defaulters list
of RBI/CIBIL
No winding up petition against the
company by a competent court
Company/Group
Companies/Subsidiaries not to referred
to BIFR within 5 years
No regulatory action against the
company/Promoter/Director by SEBI,
RBI,IRDA,MCA within last 5 years
BSE-SME Institutional Trading Platform



The company has not completed a
period of more than ten years after
incorporation
Revenues not exceeded 100 Crores in
any financial year.
Paid up Capital not exceeded 25 Crores
in any financial year.
atleast one full year’s audited financial
statements.
27
Eligibility Criteria-Contd.
In addition ,Any one of the following criteria:

Minimum Investment of 50 Lakh in Equity Shares by either AIF or VCF or other category of
Investors Approved by the Board or Angel Investor(Member of Any Angel Association or
group).

The company has received finance from a scheduled bank 3 years back and funds so
received have been fully utilized.

Minimum Investment of 50 Lakhs in equity shares by a registered merchant banker or QIB
locked in for 3 years from the date of Listing.

A specialized international multilateral agency or domestic agency or a public financial
institution as defined under section 4A of the Companies Act, 1956 has invested in the
equity capital of the company.
BSE-SME Institutional Trading Platform
28
Exchange Criteria
 The Company shall satisfy at least one of the following criteria as on date of
application:Net Tangible Assets of minimum Rs. 1 Crore. (Net Fixed Assets plus Net Current
Assets)
OR
Net income* (excluding extraordinary and other income) of Rs. 50 Lacs as per the
latest audited financials. *(Net income = Sales – Purchases)
 There has been no change in the promoters of the Company in preceding one year
from date of filing application to BSE for listing on ITP segment.
 Mandatorily signing tripartite agreement with both the depositories.
29
I.
Listing of Specified Securities
30
Listing of Specified Securities(106 Z)

A company that fulfils the eligibility criteria specified in regulation 106Y may apply to a
recognised stock exchange for listing of its specified securities on the institutional trading
platform, enclosing therewith an information document containing disclosures.

The information document shall be made public by hosting it on the website of recognised
stock exchange for a period of atleast twenty one days from the date of such filing.

The recognised stock exchange may grant in-principle approval to the company.


The company which has received in-principle approval from the recognised stock exchange
for listing of its specified securities on the institutional trading platform shall be deemed to
have been waived by the Board under sub-rule (7) of rule 19 from clause (b) of sub-rule (2)
of rule 19 of Securities Contracts (Regulation) Rules, 1957 for the limited purpose of listing
on institutional trading platform.
The recognised stock exchange on satisfying that the applicant is compliant with
regulation 106Y and its bye-laws may list the securities of the company on the institutional
trading platform.
BSE-SME Institutional Trading Platform
31
Conditions on issue of securities and raising of Capital (106 ZA)
(1) Listing of specified securities on institutional trading platform shall not be accompanied by
any issue of securities to the public in any manner.
(2) The company shall not make initial public offering while its specified securities are listed on
institutional trading platform.
(3) The company listed on institutional trading platform may raise capital through private
placement or rights issue without an option for renunciation of rights.
(4) The private placement of securities by a company whose securities are listed on institutional
trading platform shall be subject to the following:
a) the company shall obtain in-principle approval from the recognised stock exchange prior
to private placement;
b) the approval of shareholders through a special resolution under sub-section (1A) of
section 81 of Companies Act, 1956 shall be obtained;
BSE-SME Institutional Trading Platform
32
Conditions on issue of securities and raising of Capital
c) the company shall complete allotment of securities within two months of obtaining such
approval.
d) the explanatory statement to the notice to shareholders shall include the disclosures
regarding:
(i) the purpose for private placement.
(ii) identity of allottees.
(iii) whether allottee is a promoter or belongs to the promoter group and if not the
relationship between promoter and allottee.
(iv) nature of securities being issued.
(v) price at which the security is being issued.
e) the disclosures as referred to in clause (d) of sub-regulation (4) shall be made available to the
recognised stock exchanges for dissemination, atleast fifteen days prior to the general body
meeting where approval of shareholders is being sought for the proposed private
placement;
BSE-SME Institutional Trading Platform
33
Conditions on issue of securities and raising of Capital
f) the securities so issued through private placement shall be made at a price not less than
higher of the following:
(i) the book value of the equity shares as per its last audited financial statement not older
than six months;
(ii) value of shares as determined in an independent auditor’s or registered merchant
banker's report.
(5) A company listed on institutional trading platform making a rights issue shall comply with
the following:
a) there shall not be an option for renunciation of rights;
b) the company shall obtain in-principle approval from the recognised stock
exchange where its securities are listed prior to a rights issue.
c) the company making a rights issue shall send a letter of offer to its shareholders through
registered post or speed post or electronic mode and the same shall be made available on
the website of the company and the recognised stock exchange.
BSE-SME Institutional Trading Platform
34
Other Guidelines

Not less than twenty per cent. of the post listing capital shall be held by the promoters at
the time of listing of specified securities of the small and medium enterprise which shall be
locked-in for a period of three years from date of listing.

All specified securities of the company shall be in dematerialized form upon listing on
institutional trading platform.

The minimum trading lot on institutional trading platform shall be ten lakh rupees.

SEBI(Substantial Acquisition of shares and Takeover) regulations, 2011, will not apply to
companies listed on ITP.

SEBI(delisting of Equity Shares) regulations ,2009, will not apply to companies listed on ITP
Admission process
35
J.
Exit Options
36
Exit Options(106 ZD)
Voluntary Exit
Growth Exit
a) its shareholders approve such exit by
passing a special resolution through
postal ballot where ninety per cent. of
total votes and the majority of nonpromoter votes have been cast in favor
of such proposal.
b) the recognised stock exchange where its
shares are listed approve such exit.
a) its specified securities have been listed
on this platform for a period of ten
years.
b) the company has paid up capital of
more than twenty five crore rupees.
c) the company has revenue of more than
three hundred crore rupees as per the
last audited financial statement.
d) the company has market capitalization
of more than five hundred crore
rupees.
BSE-SME Institutional Trading Platform
37
38
Contact:
BSE LTD
Ajay Thakur (Head, BSE SME)
27th Floor, P.J Towers Dalal Street
Mumbai-400001
Tel: 022-22728291
Mobile: 9820359932
Email – [email protected]
Parth Shah
Tel: 022-22728893
Mobile:9819276244
Email:[email protected]
39