SME IPO listing criteria and how SMEs can migrate to main board

A private limited company, proprietary firm or a partnership firm first of all needs to be converted into a public limited company to be listed on the BSE SME Exchange and NSE's Emerge.

Both the exchanges have their own eligibility criteria for SME listings in addition to the SEBI norms for listing.

Parameters for listing on the BSE SME Exchange are as follows:

1.    The company should have net tangible assets of at least Rs 3 crore in the latest audited financial results.

2. The net worth should be at least Rs 3 crore as per the latest audited financial results.

3. The post-issue paid up capital of the company shall be at least Rs 3 crore and should not exceed Rs 25 crore.

4. The company shall enter into an agreement with both the depositories and mandatorily facilitate trading in demat securities.

5. The minimum application and trading lot size shall not be less than Rs 1,00,000.

6. The merchant bankers shall underwrite 15 per cent in their own account and the issue shall be 100 per cent underwritten.

Parameters for listing on Emerge of the NSE:

1.  The post-issue paid up capital of the company shall not be more than Rs 25 crore

2. The company should have track record of at least 3 years.

3. The company should have positive cash accruals (EBDT) from operations for at least 2 financial years preceding the application and its net worth should be positive.

4. No petition for winding up is admitted by a court of competent jurisdiction against the applicant company.

5. No material regulatory or disciplinary action should have been taken by a stock exchange or regulatory authority in the past three years against the applicant company.

How can SME IPO’s migrate to main board?

The companies have to be mandatorily listed first on any of the SME platforms, Emerge - NSE and BSE SME.

Secondly, the listed companies should have been traded on the SME platforms for a minimum period of two years and only after that they can migrate to the main board as per SEBI guidelines.

To move up to the main board, the SME exchange companies have to ensure that their paid-up capital exceeds Rs 10 crore but below Rs 25 crore. In cases where the post issue paid-up capital is likely to exceed Rs 25 crore, the SME exchange companies shall migrate to the main board. In this case, approval of the non-promoter shareholders is required with at least two-third majority. The companies should have the approval of their shareholders and the company should assess the eligibility criteria for listing on the main board.