Booster dose for SMEs-Listing without an IPO

SEBI, with the intent to give a boost to the SME sector, has initiated a new trading platform for the SMEs and has issued notification on the modalities involved therein. The new Regulations shall be called SEBI (Listing of specified securities on Institutional Trading Platform) Regulations, 2013. According amendments have also been made in SEBI (ICDR) Regulations, SEBI (SAST) Regulations and SEBI Delisting Regulations.

Through these amendments, SMEs would be able to get listed on the said Platform, without coming out with an IPO, thus doing away with many a costs and legal hassles.

The basic requisite is that these shall be applicable only on those SMEs, whose securities are not listed on any recognised stock exchange and which seek listing of their specified securities exclusively on the institutional trading platform.

Eligibility

A small and medium enterprise shall be eligible for listing on the platform, only if it satisfies the following:

1. Company/ its promoters/ any group company should not appear in the willful defaulters list of RBI or CIBIL.
2. No winding up petition has been admitted against the company.
3. The company, its group companies or subsidiaries have not been referred to BIFR during preceding 5 yrs prior to the date of application for listing;
4. No regulatory action has been taken against the company, its promoter or director, by the SEBI, RBI, IRDA or MCA within a period of 5 years prior to the date of application for listing;
5. Company has not completed a period of > 10 years after incorporation and its revenues not exceeded Rs. 100 crore in any of the previous financial years;
6. Paid up capital has not exceeded Rs. 25 Crores in any of the previous financial years;
7. The company has atleast one full year’s audited financial statements.
8. In addition to all the above, it must satisfy any one of the following conditions as well:
   • Atleast 1 AIF/ VCF/ other category of investor/ angel investor has invested a minimum amount of Rs. 50 lacs in equity shares of the company, or
   • The company has received finance from a scheduled bank for its project financing/ working capital requirements and a period of 3 yrs has elapsed from such financing and the fund have been fully utilized, or
   • A Registered merchant banker has exercised due diligence and has invested not less than Rs 50 lacs in equity shares of the company which shall be locked in for a period of 3 years from the date of listing, or
   • A QIB has invested not less than Rs. 50 lacs, which shall be locked in for a period of 3 years from the date of listing, or
   • A specialized international multilateral agency or domestic agency or a PFI has invested in the equity capital of the company.

1. Alongwith the application to the exchange, an Information Document is needed to be filed. It shall be made public by hosting on the Exchange’s website for a period of atleast 21 days from the date of such filing.
2. The recognised stock exchange may grant in-principle approval to the company.
3. On receipt of the said in-principle approval, the company shall be deemed to have been waived by SEBI under sub-rule (7) of rule 19(2)(b) of SCRR for the limited purpose of listing on the platform.

1. This listing shall neither be accompanied by any issuance of securities to the public nor shall the company come out with a public offer, while listed on the platform.
2. To augment its fund requirements, it may raise capital through private placement or rights issue without renunciation of rights, subject to fulfillment of conditions.

At least 20% post listing capital shall be held by the Promoters with a lock in period of 3 years from the date of listing.

All specified securities shall be traded only in dematerialized form and minimum trading lot shall be Rs. 10 Lacs.

SEBI has also prescribed a simplified mode of delisting. A company may delist by passing a special resolution through postal ballot, wherein 90% of total votes and majority of non promoter votes have been cast in favour of the proposal and by obtaining exit approval from the concerned stock exchange

A company shall mandatorily exit the platform in the following events:

• Period of 10 years has expired from listing.
• Company has paid up capital of more than Rs. 25 Crores
• The company has revenue of more than Rs. 300 crore as per the last audited financial statement and market capitalization of more than Rs. 500 crore

The stock exchange may grant extension 18 months upon happening of any of the above events.

If a Company has failed to file its periodic filings with the exchange/ failed to comply with corporate governance norms/ other listing conditions for more than 1 year, the Company shall be delisted from the Platform.

In case of a compulsorily delisting, no company promoted by its Promoters and Directors (except its Independent Directors) shall be permitted to be listed on the Platform for a period of five years from the date of such delisting.

In addition to the above amendments in ICDR Regulations, suitable amendments have also been made in SEBI Takeover Code and Delisting Regulations as well, mandating that the respective Regulations shall not be applicable in case of companies listed on the platform.