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There are at least a million sizeable SMEs in the country, and so far there have been only debt financing options without any access to equity capital. Many SMEs find it difficult to get listed on the Bombay Stock Exchange (BSE), so the SME Exchange has been conceived. It will help the SMEs in raising equity capital for their growth. Raising equity will help them balance their debt-equity ratio, and balance sheets will be much healthier. This will help the companies to unleash their valuation. Listed companies will have easy access to alternate funding options like price-to-earning ratios, ADRs, GDRs, foreign industrial investments and so on. The repose of faith by investors in listed SMEs is high. Most importantly, all investors look for an exit at an appropriate point, and an exchange is the right platform.
Simplification of the Listing Norms for SMEs on the BSE SME Exchange
The Listing norms are simplified. The issuer has to take the approval of the Exchange and SEBI s approval is not required. A copy will be sent to the SEBI for its information. The condition of track record of distributable profits in terms of Section 205 of the Companies Act, 1956, for at least 3 out of preceding 5 years is waived off for SMEs. Four steps - the filing of DRHP, in-principle approval of the exchange, in-principle of the SEBI and public notice for one month are waived off for the SMEs listing on the SME Exchange. This will save about 6 months for the listing of SMEs. The merchant banker to the issue can file RHP (Red Herring Prospectus) with the due diligence certificate and the exchange approval is sufficient. The process of launching an IPO for listing on SME Exchange may be completed within two to three months, compared to the time frame of 8 to 9 months required for launching an IPO proposed to be listed on the Main Board.
The other additional responsibility is that the issue should be 100% underwritten and the merchant banker has to do compulsory underwriting of 15% in his own books of accounts. There is need for syndication for the purpose of underwriting and the responsibility lies with the merchant banker. There is no such responsibility cast upon the merchant bankers while listing scrips on the Main Board.
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