Listing Procedure for MSME IPO in Delhi 2022: How to Apply Through Different Bank

In a manner similar to how small, mid-cap, and blue-chip corporations are listed on the mainboard, MSME IPO in Delhi can raise money by going public on the SME stock exchange.

This is a platform specifically for SMEs, and listed SMEs can move to the mainboard after a few years of being listed there and satisfying other criteria.

What is the SME IPO?

 In India SME exchange works within BSE Limited and NSE of India. When SME is combined with BSE it is a BSE-SME exchange and when combined with NSE it becomes EMERGE.

Eligibility criteria for SME exchange?

• The company should be formed following the Companies Act of 1956.
• BSE’s paid-up capital ranges from Rs. 3 crores to Rs. 25 crores.
• The minimum net worth of the company should be Rs. 3 crore.
• There should be distribution profits for at least two years out of the previous three fiscal years. The net worth will be Rs. 5 crores.
• The net tangible assets should be Rs. 3 crore. 
• Company sales should be approx Rs 10 crore

Other Requirements

• The company website is compulsory
• Trading in Demat account securities is mandatory as entering an agreement with the depositories. 
• Companies in partnership or proprietorship can also apply as their date of incorporation is counted. 
• The company shouldn’t be directed as BIFR. 
• A court of competent jurisdiction should not file a winding-up petition against the applicant company.
• No action should be taken by the stock exchange. 

Method for SME listing 

• The previous three years’ compliances must be completed.
• All previous three years’ financial statements must be accurate.
• All pending legal proceedings must be disclosed.
• Background, education, experience, and KYC of promoters and directors, etc.
• Company Prospectus
• The prospectus should be filed with BSE
• Inspection will be done by BSE to check whether the company is not bogus. 
• Once you get approval from BSE, you can launch an IPO on the BSE website after printing the prospectus. 
• During the issue, a minimum of 50 shareholders are required, which means that a minimum of 50 applications must be received.
• The listing is completed in 5 days and market trading begins.
•  Underwriters ensure the minimum subscription from the public, and if that is not met, underwriters will subscribe to those shares. SME listing requires 100% underwriting.
• You can keep up to 75% of the shares for promoters and owners, but you must bring at least 25% of the shares for public listing.

Compliance for SME IPO listing

• A full-time company secretary (compliance officer) will be appointed.
• Adding 50% of independent directors to the board.
• Website is compulsory
• The minimum application fee for the general public is Rs 100,000.
• Underwriting- The underwriter does all of the underwritings. A merchant banker or lead manager must underwrite at least 15% of the issue.
• For three years, market making is required. One year from the date of registration is required. There can only be 5 market makers. Two-way quotes are used for 75% of the trading day.
•  According to the BSE listing agreement, at least 25% of the issued paid-up capital must be held by the “public.”

Prerequisites for Migration to Mainboard

• The company must have been listed and traded on the BSE-SME for at least two years.
• Paid-up capital must be at least Rs 10 crore and market capital must be at least Rs 25 crore.
• A special resolution will be passed to seek shareholder approval.
• Other main board eligibility requirements must be met.

Benefits of SME IPO Listing 

• It is simpler to list. The minimum number of allottees required is only 50, which can be achieved through targeted marketing. Reduced cost, time, and effort required to be listed.
• It aids in the raising of capital.
• The underwriting issue will guarantee that it is fully subscribed. 
• International and national credibility, branding, and visibility.
• Listed shares have lower capital gains taxes than unlisted shares.
• Employees can be given ESOPs instead of large salaries. Aids in talent retention.
• The leverage ratio becomes more appealing, and the ability to raise debt grows.
• Increases visibility and credibility
• Increase in net worth
• Increases working capital and widens the capital base.
•  Instead of benchmarking with established large corporations on the mainboard, informed investment banks delhi may offer potential-based valuations.

Approximately 6 months to 1 year. It takes about 2 years on the main board. As a result, the time involved in an SME-IPO is nearly half.

When a company goes public, it must dilute 25% of its equity. The company will issue new shares, raising promoter equity to 75% and exposing the remaining 25% to the public. 

Furthermore, a 51% shareholding is required to pass any resolution in the company. Even after the MSME IPO launch, the promoter retains complete control and voting power in the company.