SME Listing
Presented by :
NitiN Somani
Company Secretary
SPA Capital Advisors Limited
Category - I Merchant Banker & Portfolio
Manager
WHAT IS AN SME
 A definition is available under MSME Act
 For manufacturing segment, limits w.r.t. investment in plant and
machinery: MICRO enterprise with less than Rs. 25 lakhs; SMALL
enterprise with more than Rs. 25 lakhs but less than Rs. 5 cr; and
MEDIUM enterprise with more than Rs. 5 cr but less than Rs. 10
cr
 For service segment, limits w.r.t. investment in equipments:
MICRO enterprise with less than Rs. 25 lakhs; SMALL enterprise
with more than Rs. 25 lakhs but less than Rs. 5 cr; and MEDIUM
enterprise with more than Rs. 5 cr but less than Rs. 10 cr
 The aforesaid definition does not applies to the definition of SME
for listing requirements
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
CLASSIFICATION OF AN SME
 For the listing requirements, SME can be classified into following
categories:
Companies
eligible for
Listing on SME
platform
Listing criteria broadly based on
financial parameters
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Companies
eligible for
Listing on ITP
platform
Listing criteria broadly based on
sector and / or holding of the
shareholders in the Company
By: NitiN Somani, SPA Capital Advisors Limited
PHASES FOR AN ORGANISATION
Seed funding:
Promoters and close
friends and relatives
Angel funding:
Capital for kick off with
mentoring
VC funding:
Capital for growth (Series A)
PE funding:
Capital for expansion
(Series B / C)
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By: NitiN Somani, SPA Capital Advisors Limited
(A Platform for Small and Medium Enterprises)
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By: NitiN Somani, SPA Capital Advisors Limited
ELIGIBILITY NORMS AND KEY REQUIREMENTS FOR
LISTING
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Post issue face value capital does not exceed 25 crore
Minimum Application Size shall not be less than one lakh per application
Number of prospective allottees should not be less than 50.
100% underwritten
Market Making for minimum 3 years
Mandatory facilitation of trading in Demat securities
PREPARATION FOR SME IPO
 Appointment of intermediaries, viz. Merchant Banker, Registrar, Printer,
Banker, Advertiser, Market maker
 Due diligence to be completed. Due diligence to cover all aspects relating
to the company, legal, financial, secretarial, operational, etc
 Proposed project and the fund requirement for the same
 Marketing and creating awareness for the company & issue
 Interaction with various other intermediaries and stock brokers
 Effective communication
 Creating sustainable valuation and shareholder base
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
PROCESS FOR SME LISTING
Due Diligence of Company and appointment of
intermediaries
Company to file draft information document with stock
exchange and SEBI
Obtain approval from Stock Exchanges
Issue opening and issue closing
Allotment / Listing
Total process may take around 2-3 months, if all information compiled by the Company
immediately
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By: NitiN Somani, SPA Capital Advisors Limited
ADVANTAGES OF SME LISTING
Company advantages
 Fund availability from investors
 Visibility and creating track record
 Better liquidity - entry & exit platform
Regulatory Benefits
 No tax on LTCG
 Lower tax rate for STCG
 No tax on share premium (Section
56)
 Simplified disclosure norms (half
yearly)
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Others
 Enhancing shareholders value
 ESOPs - liquidity for employees
By: NitiN Somani, SPA Capital Advisors Limited
MIGRATION TO MAIN BOARD
Compulsory Migration to
Main Board
Post Issue Face Value Capital
increases beyond Rs. 25 crores
Shareholders to approve by way of
special resolution through postal
ballot
Issuer shall obtain in-principle
approval from the Main Board
At least Two times votes in favor
than in against (pubic shareholders)
Optional Migration to Main
Board
Post Issue Face Value Capital more
than 10 crore rupees and upto Rs. 25
crores
Fulfills the eligibility criteria for
listing by Main Board
At least Two times votes in favor
than in against (public shareholders)
Shareholders to approve by way of
special resolution through postal
ballot
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By: NitiN Somani, SPA Capital Advisors Limited
(A Platform for Startups and Emerging Companies)
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By: NitiN Somani, SPA Capital Advisors Limited
KEY FEATURES ON ITP
Definition of ITP: “institutional trading platform” means the trading
platform for listing and trading of specified securities of entities that
comply with the eligibility criteria specified in regulation 106Y.
 The minimum application size shall be ten lakh rupees.
 The number of allottees shall be more than two hundred.
 The allocation in the net offer to public category shall be as follows:
 75% to institutional investors, provided that there shall be no separate
allocation for anchor investors.
 25% to non-institutional investors.
 Any under-subscription in the non-institutional investor category shall
be available for subscription under the institutional investors category.
 Allotment to institutional investors shall be on a discretionary basis
and to non-institutional investors shall be on proportionate basis,
 The offer document shall disclose the broad objects of the issue.
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By: NitiN Somani, SPA Capital Advisors Limited
LISTING ELIGIBILITY FOR ENTITIES ON ITP
1(a) An entity which is in the use of technology, IT, intellectual property, data
analytics, bio-technology or nano-technology to provide products, services
or business platforms with substantial value addition and at least twenty
five per cent of its pre-issue capital is held by QIB(s) as on the date of filing
of draft information document with Board.
1(b) Any other entity which at least fifty per cent of the pre-issue capital is held by
QIB(s) as on the date of filing of draft information document or draft offer
document with the Board.
2
No person, individually or collectively with persons acting in concert, shall
hold twenty five per cent or more of the post-issue share capital in an
above mentioned entity
LISTING OF STARTUPS THROUGH ITP
 ITP is the most recently launched trading platform for listing and trading of
specified securities of start up ventures
 Listing can be done without public issue and also with public issue
 Lesser listing compliance requirements
 Trading platform for informed investors / institutions
 Minimum trading lot of Rs. 10 lakhs
 The entire pre - issue capital of the shareholders shall be locked-in
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
Higher Visibility & credibility
 Visibility on getting
improve
credibility
stakeholders
 Will attract
sophisticated
company
listed
with
Non applicability of Laws
will
all
new profile of
investors in the
 Minimum
public
shareholding
requirements
 SEBI (Delisting of Shares) Regulations,
2009
 Any share premium taken by the Company
for allotment of securities over and above
their fair value will not be taxable (section
56 of Income Tax Act 1961)
Setting the stage
 Gives flexibility to the Company to
raise money for new ideas and
technologies
 Listing entails robust corporate
governance and internal controls
and systems
 Prepares a company for a wider
fund raising in future
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
LISTING WITHOUT PUBLIC ISSUE
Due Diligence of Company
Company to file draft information document
Obtain In-principle approval from Stock Exchanges
Obtain 19(2)(b) exemption from SEBI for listing on ITP. SEBI
observation deemed 19(2) (b) and 17(7) of SCRR
Company to apply for listing of securities on Stock Exchanges within
30 days.
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
EXIT/ DELISTING FROM ITP
Voluntary Delisting from
ITP
Shareholders to approve by way of
special resolution through postal
ballot
90% of the total votes should be
casted in favor of delisting
Approval of stock exchange for
delisting
Majority of non promoter votes
should have been casted in favor
MIGRATION FROM MAIN BOARD
An entity that has listed its specified securities on a recognised stock
exchange in accordance with the provisions of Chapter XC of SEBI ICRD
Regulations 2015 may at its option migrate to the main board of that
recognised stock exchange after expiry of three years from the date of listing
subject to compliance with the eligibility requirements of the stock exchange.
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By: NitiN Somani, SPA Capital Advisors Limited
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By: NitiN Somani, SPA Capital Advisors Limited
INTRODUCTION
What is a Startup?
Startup means an entity, incorporated or registered in India not prior to five
years, with annual turnover not exceeding INR 25 crore in any preceding
financial year, working towards innovation, development, deployment or
commercialization of new products, processes or services driven by
technology or intellectual property.
What is a Startup India Plan?
Startup India is a flagship initiative of the Government of India,
intended to build a strong eco-system for nurturing innovation and Startups
in the country that will drive sustainable economic growth and generate
large scale employment opportunities.
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
What QUALIFIES A STARTUP?
Must be a private Co./LLP/Partnership firm
A
D
C
B
Age should not be more
than 5 years
Turnover should not
exceed 25 crores
Should develop a innovative product
which should add to the value of
customers and should be commercial
E
Get a approval from DIPP that your company is
innovative
F
Recommendation
letter by incubator in
post
graduate
Indian College.
F1
F3
F4
Is funded by an
incubation
fund/
Angel Fund/Private
Equity Fund/ Angel
Network
Has
patent
granted by Indian
Patent
and
Trademark Office
related to business
F2
Recommendation
letter by incubator
funded by GOI.
Recommendation
letter by incubator
recognised by GOI.
If you meet conditions A, B, C, D, E and any of F
series then you are a Startup.
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
Key highlights
 Compliance regime based on self certification (app based and for certain
labour & environment laws and no inspection for 3 years)
 To set up Start up India Hub where it will collaborate with governments,
VCs, angel investors, incubators, consultants, etc
 Mobile app and portal for faster clearances and approvals
 Legal support and fast tracking patent applications at lower costs
 Relaxed norms for public procurement for startups
 Faster exit
 Providing funding support through fund of funds with corpus of 10,000 cr
 Credit guarantee fund for INR 500 cr for next 4 years
 Tax exemption on capital gains
 Tax exemption for 3 years to the start ups
 Tax exemption on investments above fair value
 Organising start up fest or showcasing innovation and providing a
collaboration platform
 Launch of Atal Innovation Mission (AIM) with Self Employment and Talent
Utilisation (SETU) program
 Harnessing private sector expertise for incubator setup
 Building innovation centre
 Setting up of 7 new Research Parks
 Promoting start ups in the Bio technology sector
 Launching of innovation focused programs for students
 Annual Incubator Grand Challenge
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By: NitiN Somani, SPA Capital Advisors Limited
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By: NitiN Somani, SPA Capital Advisors Limited
OPPORTUNITIES
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Creating new business opportunities
Higher visibility
Acquisition of talent pool
Favorable tax treatment for investments in listed shares
Indian demographic advantage attracting overseas investors
New business Ideas defying existing rules of the game
Regulated financial markets
M&A opportunities
By: NitiN Somani, SPA Capital Advisors Limited
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By: NitiN Somani, SPA Capital Advisors Limited
Legal and
regulatory
compliances
and issues
Management of
Resources with
available
constraints
Raising of right
capital at right
time
Challenges faced
by
SMEs
Retention of
talent
Rapid Growth
and adding
Talent
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Finding the right
co-founder
Mentorship &
right advisory
Favourable
govt. policies
& minimal
entry barriers
By: NitiN Somani, SPA Capital Advisors Limited
Using analytics
Change in
technologies
and adaptive
systems
Innovative idea
and maintaining
focus with
prioritisation
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Balance with
personal life
and minimise
stress
Challenges faced
by
SMEs
Sustainable
and long term
business
model
Marketing and
creating visibility
Capital
structuring
Minimising
cash burn
By: NitiN Somani, SPA Capital Advisors Limited
SUCCESS MANTRA FOR SMEs!
Fund
Raising
Innovations
and Creativity
Staying
ahead in
competition
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Dedicated &
experienced
team
Mentorship
and focused
approach
Regulatory
compliances
By: NitiN Somani, SPA Capital Advisors Limited
Finance Professional:
Acts a financial interface between
promoters and venture capitalists for
fund raising and managing capital
Secretarial Matters:
Helps in compliance of various
companies act laws which changes
drastically
Role of
Professionals
Tax Professional:
Help smoothen the business operations
as they are well equipped with taxation
laws.
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Merchant Banker:
Liaison with SEBI and Stock Exchanges
for fund raising through capital market
By: NitiN Somani, SPA Capital Advisors Limited
ROLE FOR COMPANY SECRETARIES
During business conceptualization
 Advise on the structure for the business, based on requirement
 Assist in getting the right legal vehicle formed / incorporated
 Initial capital structuring and setting up of processes
During the nascent phase of the business
 Hand holding for legal advisory services related to taxation matters, corporate
laws, labour laws, IPR protection, etc
 Accounting services & secretarial support services
 Liasioning with various regulatory authorities
Business growth phase
 Assisting in getting the corporate structure right
 Assist in designing of business plan
 Assist in fund raising at Angel, VC or PE stages
 Risk advisory
 Getting compliances done
Exit phase
 Identifying the exit (partial or full) opportunities
 Tax planning
“One stop shop for all Start up advisory”
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By: NitiN Somani, SPA Capital Advisors Limited
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
INTRODUCTION
What is Delisting?
 Removal of a listed company from the exchange on which it is traded
 Publicly available trading platform is no longer available to the
shareholders
 Option of shareholders to exit or remain with the company
 Shares acquired by the promoter of the company with no change in
capital structure
 Company and Promoters to comply with the delisting requirements and
process
 Promoter to bear the cost of delisting (other than delisting fees)
 Company becomes closely held
 Restriction on again tapping the capital markets
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
DELISTING OPTIONS
Voluntary Delisting
Remain listed on some exchange
and delist from some
Compulsory Delisting
As a result of action taken by
Regulator
Delist from all exchanges
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By: NitiN Somani, SPA Capital Advisors Limited
DELISTING OPTIONS
Voluntary Delisting
Remain listed on some exchange
and delist from some
If listing continued on exchange
having nation wide trading
platform, no exit to be provided
Delist from all exchanges
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Small companies
Simplified delisting process
Other companies
Reverse book building process to
be followed
By: NitiN Somani, SPA Capital Advisors Limited
DELISTING - SMALL COMPANIES
 Covered under Chapter VII of the SEBI Delisting Regulations
 Defined as:
 Paid up capitla not exceeding Rs. 10 cr.
 Net worth not eeeding Rs. 25 cr.
 Share not traded on any stock exchange in the past one year
 Company not suspended by any nation wide stock exchange for noncompliance in the last one year
 Special resolution is passed if:
 Requirement of special resolution are fulfilled i.e. ¾th majority
 Votes casted in favor by public shareholdes should be atleast two times the
votes casted against the delisting
 Delisting achieved if:
 90% of the public shareholders either tender their shares under the offer;
or
 90% of the public shareholders give their positive consent in writing from
delisting and to continue as shareholder of delisted company
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By: NitiN Somani, SPA Capital Advisors Limited
PROCESS
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Promoter to decide
proposal for
delisting and
inform company
Promoter to
appoint merchant
banker and obtain
fair valuation
Board to seek
approval of
shareholders
through postal
ballot
Payments to be
made within 15
working days
Process to be
completed within
75 days of first
communication to
shareholders
Individual offer
letters are sent to
shareholders for
providing exit
opportunity
By: NitiN Somani, SPA Capital Advisors Limited
DELISTING - COMPANIES OTHER THAN SMALL
COMPANIES
 In principle listing approval required from the Stock Exchanges
 If company is suspended, revocation of suspension also to be applied for
 Special resolution is passed if:
 Requirement of special resolution are fulfilled i.e. ¾th majority
 Votes casted in favor by public shareholders should be atleast two times the
votes casted against the delisting
 Shares tendered under delisting process through stock exchange platform and
chargeable to STT. Shareholders to have benefit of NIL tax rate on LTCG and
concessional tax rate on STCG
 Delisting achieved if, higher of following achieved:
 Promoter holding reached 90% or more of the total issued shares and
 Atleast 25% of the public shareholders (by number) holding shares in demat
form had participated in the reverse book building process
 Final delisting application to be filed with one year from the date of passing of
special resolution
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By: NitiN Somani, SPA Capital Advisors Limited
PROCESS
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Promoter to decide
proposal for
delisting and
inform company
Promoter to
appoint merchant
banker and obtain
fair valuation
Board to appoint
merchant banker
for due diligence
(shareholding
change in 2 years)
Open demat and
cash escrow
account
Make application to
stock exchanges for
in-principle
delisting approval
Post receipt of DD
report, consent of
shareholders to be
obtained through
postal ballot
Give newspaper
advertisement
(Hindi + English +
Regional where SE
situated)
Dispatch offer
letters to
shareholders
Offer to remain
open for 5 working
days
By: NitiN Somani, SPA Capital Advisors Limited
PROCESS
Tendering of shares
through platform of
the stock exchange
Finalisation of offer
price: where 90%
achieved
Promoter has
option to accept /
reject the price so
arrived at
In case of success &
price accepted:
Payment to
shareholders within
10 working days
In case of failure:
Return shares
within 10 working
days
Public
announcement of
failure or success of
offer
Delisting approval
Exit opportunity to
remaining
shareholders for 1
year
Make final
application for
delisting
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
DELISTING - CONTENTIOUS ISSUES
 If shareholders are participating in the reverse book building process, why there
is a requirement of postal ballot approval. Removing postal ballot requirement
may reduce the timelines by around 45 days and also cost. At the end of day, till
company is listed, it is shareholders money
 How to service the remaining public shareholders, post delisting and new
companies act related issued e.g. related party transactions, etc.
 Companies listed exclusively on regional stock exchanges which have either exited
or de-recognised by SEBI
 Such companies moved to dessimination board of NSE and / or BSE
 Either Company shall get itself listed on a stock exchange with nation wide
platform or Promoters to provide an exit opportunity to the public
shareholders
 Period of 18 months provided to company / promoter to take necessary
action
 Failure to take action by the company / promoter will impact any future
association of such company / promoter with securities market
 Major issue: The circular for providing exit opportunity came in April 2015.
However SEBI is yet to notify a process for exit opportunity. Pending any such
notification, corporate houses (especially who have other listed operational
companies) are taking judicious call and prudent steps for giving exit
opportunity to the public shareholders of such listed companies and comply
with SEBI circular ASAP.
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited
Contact:
NitiN Somani
Company Secretary
SPA Capital Advisors Limited
Category - I Merchant Banker & Portfolio
Manager
Tel.: +91 98 1069 4501
E-mail: nitin@spacapital.com
@ NIRC ICSI
By: NitiN Somani, SPA Capital Advisors Limited