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SME Listing & IPO

HomeMSMESME Listing & IPO
SME Listing & IPO
  • Author
    Rajat Khaneja
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SME exchange is a separate platform opened by Stock Exchanges to help Small & Medium Enterprises to raise equity funds through investors in Stock Market. For SME stocks to get listed and being traded on exchange, company has to come up with an Initial Public Offer (IPO) at Exchange’s SME platform. IPO is a way for companies to raise fund from investors and get listed on exchanges.

  • Eligibility Criteria for SME IPO:

For SMEs to raise funds through SME exchange, eligibility criteria have been laid by the regulators and exchanges:

1. As per SEBI Guideline:

  • Max Post Issue capital Rs.25 crores;
  • Minimum number of members for issue of IPO is fifty (50);
  • After listing, no minimum of members required to be continued;
  • Market making is mandatory for 3 years;
  • Issue must be fully underwritten (merchant bankers to underwrite 15% in own account).
  • Minimum application and lot size must be of Rs. 1,00,000 and in multiple thereof.

2. As per BSE SME Guidelines:

  • The post issue paid-up capital of the company shall be at least Rs. 3 Crores;
  • The company shall have net tangible assets of at least Rs. 3 Crores as per the latest audited financial results;
  • The company have a track record of distributable profits in terms of Section 123 of the Companies Act, 2013 for at least two years out of immediately preceding three financial years and each financial year has to be period of at least 12 months. Extraordinary income will not be considered for the purpose of calculating distributable profits OR net worth shall be at least Rs. 5 Crores.
  • The company shall have net worth (excluding revaluation reserves) of at least Rs. 3 Crores as per the latest audited financial results.
  • Other Requirements:
  1. The company shall have a website;
  2. The company shall mandatorily facilitate trading in dematerialized (Demat) securities and enter into an agreement with both the depositories;
  3. There should not be any change in the promoters of the company in preceding one year from date of filing the application to BSE for listing under SME segment.
  • Disclosures:

A certificate from the applicant company stating the following:

  1. “The Company has not been referred to the Board of Industrial and Financial Reconstruction (BIFR)”.
  2. There is no winding up petition against the company, which has been admitted by the court or a liquidator has not been appointed.
  • Procedure of Listing on SME Exchange
  • The issuer company consults and appoints the Merchant Banker/s in an advisory capacity.
  • The Merchant Banker prepares the documentation after conducting due diligence regarding the company i.e. checking all financial documents, material contracts, government approval, promoter details etc.
  • Application Procedure:
  1. Filling of draft prospectus with Stock Exchange as well as with SEBI by the Merchant Banker.
  2. Stock Exchange official verifies the documents and also verifies the Company’s site and the promoter are called for an interview with the Listing Advisory Committee.
  3. Stock Exchange may issue in principle approval on the recommendation of the committee subject to the all the requirements are complied by the issuer.
  4. After getting in principle approval from Stock Exchange, Merchant Banker file prospectus with the concerned ROC indicating the opening and closing date of the issue.
  5. Once approval is received form ROC, Merchant Banker intimates the Exchange regarding opening dates of the issue along with the required documents.
  • The Initial Public Offer opens and closes as per schedule, after the closure of IPO, the company submits the documents as per requirements the exchange for finalization of the basis of allotment.
  • Stock Exchange finalizes the basis of allotment and issues the Notice regarding Listing and Trading.
  • Advantages of SME Listing:
  1. SME listing is the easy way to raise capital through equity infusion for growth oriented SME’s.
  2. In case of listed securities, there are tax benefits as under:
Tax Benefits Shares listed on SME exchange Unlisted Shares
Long Term Capital Gains Tax 0% 20% after indexation.
Short Term Capital Gains Tax 15% 30%


3. SME listing enhances credibility and financial status of the company

4. Equity financing provides growth opportunities like expansions, mergers and acquisitions.

5. SME listing enables liquidity for shareholders to freely trade in the securities of the company.

6. As against an IPO on the main exchanges, for SME IPO, there are multiple benefits in terms of regulatory supervision and controls.


For more information on SME listing & IPO, contact us on E:;  M: 9871 555 311 


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