For small and medium-sized enterprises (SMEs) in India, going public can unlock access to capital, enhance brand visibility, and provide a pathway for growth. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) offer dedicated platforms—BSE SME and NSE EMERGE—designed to cater to the unique needs of SMEs. Listing on these platforms involves a meticulous process, but with the right guidance, SMEs can successfully navigate this transition. Here’s a comprehensive step-by-step guide.
Step 1: Eligibility Assessment
Before initiating the listing process, ensure that your SME meets the following criteria:
- Net Tangible Assets: Minimum of ₹3 crore.
- Net Worth: Minimum of ₹3 crore.
- Track Record: Minimum of three years of operations with positive cash flows in the previous financial year.
- Post-Issue Paid-Up Capital: Should not exceed ₹25 crore.
For a smooth journey, it’s crucial to review your company’s financial health and compliance status. Consulting with a Chartered Accountant (CA) or financial advisor early on can help identify any gaps that need addressing.
Step 2: Appointment of Intermediaries
You’ll need to appoint the following key players:
- Merchant Banker (Lead Manager): The lead manager is responsible for managing the IPO process, drafting the offer document, and ensuring compliance with regulatory requirements. Some notable merchant bankers include:
- Saffron Capital Advisors Pvt. Ltd.
- Pantomath Capital Advisors Pvt. Ltd.
- SBI Capital Markets Ltd.
- Holani Consultants Pvt. Ltd.
- IPO Registrar: The registrar manages the share allocation process, handles investor queries, and ensures smooth transfer of shares. Leading registrars include:
- Link Intime India Pvt. Ltd.
- Bigshare Services Pvt. Ltd.
- Karvy Fintech Pvt. Ltd.
- Legal Advisor: A legal advisor ensures that all documentation and agreements are in compliance with applicable laws.
- Auditor: The auditor verifies the financial statements and offers an independent assessment of the company’s financial health.
Step 3: Due Diligence and Documentation
The lead manager, such as Holani Consultants Pvt. Ltd., conducts a thorough due diligence process, which includes:
- Business and Financial Due Diligence: Analyzing business operations, financial performance, and growth potential.
- Legal Due Diligence: Reviewing legal aspects such as intellectual property, litigations, and contracts.
- Offer Document Preparation: Drafting the Draft Red Herring Prospectus (DRHP), which provides detailed information about the company, its business model, financials, and risks involved. The DRHP is submitted to the exchange for review and approval.
Step 4: Exchange and SEBI Approval
Once the DRHP is filed, it is reviewed by the stock exchange and the Securities and Exchange Board of India (SEBI). They may request clarifications or modifications. After the approval, the document is made public, inviting investor scrutiny and feedback.
Step 5: Roadshows and Marketing
To generate interest in the IPO, the company, along with the lead manager, conducts roadshows—presentations to potential investors, analysts, and brokers. This step is crucial for gauging investor interest and setting the price band for the IPO.
Step 6: IPO Pricing and Allotment
Based on investor feedback, the lead manager sets the price band for the IPO. The IPO can be offered through two methods:
- Fixed Price Issue: The price is set beforehand.
- Book Building Issue: A price range is set, and the final price is determined based on investor demand.
Investors bid for shares within the price band, and shares are allotted accordingly.
Step 7: Listing and Trading
After the allotment, the shares are credited to the demat accounts of successful bidders. The company’s shares are then listed on the BSE SME or NSE EMERGE platform, and trading commences. From this point, the company is subject to continuous disclosure norms and must comply with post-listing obligations such as submitting quarterly results and maintaining corporate governance standards.
Key Contacts for Listing on BSE and NSE
- BSE SME Platform Contact:
- Email: [email protected]
- Phone: +91-22-2272 8998
- Website: BSE SME
- NSE EMERGE Platform Contact:
- Email: [email protected]
- Phone: +91-22-2659 8235
- Website: NSE EMERGE
- Holani Consultants Pvt. Ltd.:
- Email: [email protected]
- Phone: +91-22-6682 6682
- Website: Holani Consultants
Step 8: Post-Listing Compliance
Once listed, the company must adhere to various post-listing compliances, including:
- Quarterly Financial Reporting: Filing financial results within 45 days of the quarter-end.
- Annual Reports: Submitting audited financials within 60 days of the financial year-end.
- Corporate Governance Norms: Maintaining a board with independent directors and forming committees such as the Audit Committee and Stakeholders’ Relationship Committee.
Case Studies: Success Stories on NSE and BSE SME
- Rajshree Polypack Ltd. (NSE EMERGE): A manufacturer of plastic packaging products, Rajshree Polypack listed on NSE EMERGE in 2018. The company raised ₹35 crore to fuel its expansion and enhance its production capacity.
- Focus Lighting and Fixtures Ltd. (BSE SME): Specializing in LED lighting solutions, Focus Lighting went public on BSE SME in 2017. The IPO raised ₹4 crore, which was used to set up a new showroom and improve working capital.
- SKP Bearing Industries Ltd. (BSE SME): Listed in 2021, SKP Bearing Industries raised ₹3 crore to expand its manufacturing capacity and upgrade its production facilities.
