Relaxation in BSE’s Direct Listing Norms

With a view to reenergize the capital market, BSE has recently amended its Direct Listing Norms thereby giving an opportunity not only to the Companies exclusively listed on Non-operational Stock Exchanges but also to the Companies which have been recently listed on the Stock Exchanges having Turnover of less than Rs. 500 Crore.The erstwhile requirements of 3 years listing track record at the last Recognised Stock Exchange (RSE) has been done away with.

The main Criterion remain as under:

1. Minimum Paid up Equity Capital of Rs 1 Cr & a Networth of Rs 3 Cr
2. Profits in 1 out of last 2 Financial Years
3. Minimum 500 Public shareholders, with minimum 25% to be held by them
4. Demat Connectivity and atleast 50% of the public holding to be in Demat mode.

The following additional amendments have been introduced in the above stated norms:

1. Lock-in of securities: The provisions pertaining to lock-in of Equity Shares are reproduced as follows:
1. If any preferential issue has been made by the issuer in preceding 3 years from the date of the application, the Equity Shares so issued shall be kept under lock-in for a period of 1 year from date of commencement of trading at BSE.
2. Entire promoter holding shall be kept under lock-in for a period of one year from the date of commencement of Trading at BSE

2. Changes in the capital of the company & change in shareholding: A stipulation pertaining to no change in the capital of the company in the last one year prior to the date of application till the commencement of trading at BSE has been introduced.

CP’s Viewpoint:

The above stated waiver of minimum listing period, will surely open the boulevards for the Companies which were not able to get themselves listed on the main Board of BSE merely on account of non-fulfillment of the stipulation pertaining to 3 years listing track record. However, introduction of norms pertaining to lock-in of Equity Shares issued on a preferential basis might act as a hindrance for the Companies who have made allotment(s) to QIPs/PE investors.
As all the RSE listed Companies would recall that SEBI has granted them an extended time line of only 18 months to either get listed on Nationwide Stock Exchanges or to give an exit to their shareholders, failing which their Promoters and Directors would be under strict scrutiny from SEBI. Out of the said extension, more than 3 months have already lapsed and its opportune time to avail the Direct listing norms and avoid the stigma/ repercussions that might follow because of any inaction on the part of the Promoters/ Directors.