sme primer

SME Primer

Privileged & Confidential

2Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity

Outline

• SME Listing - Background

• SME Listing - An Overview of Key Requirements & Eligibility Norms

• Core advantages of SME Listing

• SME Listing - Coming up in a BIG Way…

• Pantomath – Companion in Process

• Annexures


SME Listing – Background


SMEs – The backbone of Indian economy

Contribution to GDP 8.7 %

Share of Industrial output 45 %

Share of Exports 40 %

Total Employment

69 million

Job creation every year

1.3 million

Source : Ministry of Micro, Small and Medium Enterprises, GOI

Nation’s 1.3 million SMEs account for 40% of India's total exports

At 48 million, India is second to China in number of SMEs

SMEs employ close to 40% of India's workforce & contributes 45% to India's manufacturing output

SMEs are expected to drive the next-level growth of Indian economy provided they have enabling platform and avenues

SMEs face major problem of capital inadequacy

This problem can be tackled through Capital Market


Valley of Death

Pre seed ExpansionEarly growthSeed/Start up

Very risky

Less risky

Angel Investors

Govt. Grants

Bank Credits

Personal Finances

Angel Investors

Govt. Grants

Bank Credits

Venture Cap

Venture Cap

PE

IPO

IPO

Debt

PE

Partnership

Funding Options

Lifecycle of SME


SME Listing Background…

BSE and NSE launched

their respective

platform for SMEs; MCX

too is gearing up

for SME Exchange

The move aims at

providing an opportunity

to SME entrepreneu

rs to raise growth

capital and reap benefits

of listed space

Both BSE & NSE

leverage their

existing ‘equity

platform’ for SME

exchange platform

As per estimate of

SME Chamber of India, over 5000 SMEs

have the potential for listing

A facilitative framework

for SME listing


SME Listing – Evolution…

SEBI lays down broad

framework for SME listing

platform

5-Nov-08

PM Task Force

recomm-ends SME

listing exchange

Jan-10

SEBI circular on Guidelines for market

making

26-Apr-10

SEBI Circular

rolling out model listing

agreement for SMEs

17-May-10

Amend-ments in

SEBI Regulations

(ICDR, Merchant

Bankers etc.

18-May-10

SEBI Master

Circular on SME

exchange & Market Making

31-Dec-10

BSE Eligibility

Norms for SME listing

19-Apr-12

BSE SME Exchange

launch

13-Mar-12

SEBI circular

standardizing lot size for SME

exchange

21-Feb-12

SEBI approval to NSE SME

Exchange

14-Oct-11

Amend-mends in

Listing Agreeme

nt

5-Oct-11

SEBI approval

to BSE SME

Exchange

27-Sep-11


SME Listing - An Overview of Key Requirements & Eligibility Norms


SME Listing - Key Requirements & Eligibility NormsCapital threshold for Listing

SEBI

BSE

NSE SME Exchange

SME/Main Board

Main board

10 Crores

25 Crores

Post

Issu

e Fa

ce V

alue

Cap

ital

Particulars Requirement

Minimum application amount / trading lot INR 1 Lac

Underwriting 100% Mandatory(of which 15% to be done by MB in his own account)

Market making (to be undertaken by MB)

Through Exchange-registered market makers for min 3 years

Public ShareholdingMin. 25%Min. 50 investorsNo post-listing continuous requirement

Provisions for migration to / from Main Board from / to SME Exchange

Offer doc not subject to SEBI

vetting

Refer Annexure for key norms of SEBI ICDR


• Mandatory facilitation of trading in Demat securities

• Certificate that no winding petition or reference to BIFR

• Mandatory corporate website• Promoters to attend to interview with

Listing Advisory Committee • No change in promoter in preceding 1 year

• Net Tangible Assets : INR 1 crore (as per latest audited results)

• Net Worth (excl. Rev. Reserve) : INR 1 crore or 3 crore, if no track record

• Track record of distributable profits for at least 2 years out of preceding 3 completed FYs

Max : INR 25 croreMin : INR 1 crore

Post Issue Capital (FV)

Other Requirement

Track Record

SME Listing - Key Requirements & Eligibility Norms

SEBI

BSE

NSE

Refer Annexure for key norms of LA


Same as BSE plus additional certification / disclosures on litigation

etc.

• Track record of at least 3 years• Positive cash accruals (EBDT) from

operations and positive net worth for at least 2 FYs preceding the application

• In case the above conditions are not fulfilled, Exchange Authority (MD & Joint MD) to decide

Same as BSEPost Issue Capital (FV)

Other Requirement

Track Record

SME Listing - Key Requirements & Eligibility Norms

SEBI

BSE

NSE


BSE SME vs. Main Board

Parameters Main Board SME Exchange

Post – issue paid up capital Min INR 10 crore Min INR 1 crore; Max INR 25

crore

Minimum Allotees in IPO 1000 50

IPO underwritingNon Mandatory(Under 50% compulsory subscription to QIB’s)

Mandatory (100% underwritten with MB underwriting 15%)

IPO Grading Mandatory Not mandatory

Track record Stringent track record norms Relaxed track record norms

Offer Document vetting By SEBI By Exchange

IPO Application Size INR 10000 – INR 15000 Min. INR 1 lac

IPO Time frame 6 months 2 – 3 Months

Reporting Requirements Quarterly Half yearly

“SME Exchange

has a winning

edge over Main

Board”


Core Advantages of SME Listing


• Easy capital & fund availability

• Avoid diminution in value of business

• M&A Currency• Better liquidity – entry &

exit platform

• No tax on LTCG• STCG Tax applicable @ 15%

- reduced rate• No tax on equity infusion in

the company• No tax on ‘distress

business’ purchase

• Enhancing worth• ESOPs – Talent retention

tool• Visibility – Profile building• Governance - Internal

systems

Core Advantages of Listing

Core Advantages of

Listing


SME Listing – Coming up in a BIG way…


* Closing Price as on June 2, 2014

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13Jul-1

3

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

050

100150200250300350400450500

BSE SME Index

Return of 229% in 2013

So far, 50 Companies have been listed on BSE SME Exchange and 4 on NSE Emerge Exchange

SME LISTING - Coming up in a BIG Way…

Sunstar Realty

GCM Securities

Looks Health

CareEco

Friendly

A. Market Cap INR Crores

Pre Issue Net Worth 5.54 8.56 3.06 5.90

Issue Size 10.62 12.18 12.00 7.515

Market Capitalization*

360.73

996.98

54.33

399.48 B. Price Pattern INR Per Share

Issue Price 20.00 20.00 40.00 25.00

CMP (Face Value INR 10)* 181 525 90.55 404


Pantomath – Companion in Process

End-to-end assistance

and hand-holding

by expert &

dedicated Team –

TEAM PANTOMATHPre-IPO Capital

Restructuring and

Preparation1.

Preparation of

Offer Document

2. Offer

Management

3.Lis

ting

Assis

tanc

e

4.


Appointment of Merchant Banker

Due Diligence & Pre-IPO preparation

Preparation of Offer Document

Marketing Strategy

Appointment of other intermediaries

Filing of Offer Document with BSE & Others

Issue Pricing & Allocation

Listing & Market Making

1

3

5

7

98

6

4

Restructuring of capital 2

SME Listing – Way Forward…

19

Let’s Take It Forward….

CAPITAL ADVISORS PRIVATE LIMITEDSEBI Registered Category I Merchant Bankers

Progress with Values

DisclaimerAll data and information is provided for informational purposes only and is not intended for any factual use. It should not be considered as binding / statutory provisions. Neither Pantomath Capital Advisors nor any of its group company, directors, or employs shall be liable for any of the data or content provided for any actions taken in reliance thereon.

Corporate Office108, Madhava Premises Co-operative Society Limited, Bandra Kurla

Complex, Bandra (East), Mumbai - 400 051. Landline:(022) 26598690-91, Fax:(022)26598690

www.pantomathgroup.com


AnnexuresPantomath’s End-to-end Services


Phase- I: Pre-IPO Capital Restructuring & Preparation

Under the phase, we shall assist you in preparing for IPO and listing on SME Exchange. The services under this phase shall include the following : Assistance in devising appropriate capital restructuring plan; Assistance in statutory compliance management and setting up minimum corporate governance

practices expected by a listed company from the perspective of the following rules / regulations : Companies Act, 1956 Listing Agreement applicable for SMEs BSE listing norms SEBI ICDR Regulations;

Assistance in appointment of market intermediaries and other parties including the following; Underwriters Market Makers Registrars to Issue Bankers to Issue PR Agency, Printer etc.;

Assistance in devising a complete IPO plan and strategy including the likely post-issue shareholding distribution pattern.


Phase- II: Documentation Preparation

We shall assist you in drafting of IPO Offer Document and other important agreements, documents and resolutions necessary for an SME IPO process. An indicative list of important documents is as under for easy understanding :

IPO Offer Document, Tripartite Agreement with NSDL, CDSL and Registrar to Issue, Underwriting Agreement, Market Making Agreement, Agreement with Bankers to Issue, Agreement with Registrar to Issue, Board / Shareholders’ Resolutions, Certificates, Letters of Representations etc, Draft of public advertisements, notices etc, Forms / Applications to be filed with BSE, ROC and other regulatory office.


Phase- III: Offer Management

Once all pre-IPO preparations would be over including meeting the eligibility criteria, appointment of other market intermediaries, and drafting of offer document, we shall initiate the actual process of IPO. Our services under the phase shall include end-to-end IPO activities :

Filing of IPO Offer Document with BSE and other regulatory offices like SEBI and ROC; Follow-up with BSE and ROC for their approvals; Coordinating and assistance in interview with SE Listing Advisory Committee, Assistance in execution of agreements with other market intermediaries; Assistance in launch of IPO and coordinate with other parties including PR Agency,

Printers for adequate public advertisement, distribution of application forms as required statutorily;

Monitoring the flow of applications and keeping a real-time discussion with the management of the Company;

Coordinating with bankers and registrars for deposit of application moneys and finalization of allotment list in consultation with the stock exchange .


Phase- IV: Listing Assistance

Finally, post IPO closure and finalization of allotment, we shall initiate the activities for listing of equity shares of the Company on SME Exchange. Our scope of services under this phase 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’s trading approval, Assist in making required public disclosures as required statutorily, Coordinating for continuous market making for 3 years.


AnnexuresSome Key Norms of Listing Agreement &SEBI ICDR


SEBI ICDR As Applicable to SMEs

SEBI ICDR applies to SME listing with specific relaxations Offer document requirements and eligibility norms relaxed

Appointment of Merchant Banker, and other intermediaries required Lead Merchant Banker to the issue, Rights , obligations and responsibilities relating to disclosures, allotment, refund, and

underwriting obligations Book building or fixed priced issue permitted Lock-in conditions apply

20% of post-issue capital to be locked in for 3 years; balance promoter shareholding to be locked in for 1 year

Non-promoter pre-IPO shareholding to be locked in for 1 year with exception to ESOP shares and shares held by VCF or FVCIs for more than 1 year pre IPO

Locked-in shares permitted to be transferred inter se promoters incl. new promoter(s)


SME Listing Agreement

All SMEs getting listed need to enter into Listing Agreement (LA) with the relevant stock exchange.

BSE and NSE has adopted model LA released by SEBI.Key Requirements include the following :

Half-yearly results (Audit / limited review) Half-yearly shareholding pattern Advance notice of Board meetings with specified agenda (e.g. dividend, bonus, buy

back etc.) In-principle approval for any further issuance of shares Disclosure of price sensitive information Annual report containing inter alia full financials, consolidated financials, related party

disclosures etc. to be uploaded on corporate website Full annual report to be emailed; Abridged annual report to shareholders not on

email ids Compulsory migration to main board after the cut- off ceiling

sme primer

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