Introduction to SME Exchange

7/31/2019 Introduction to SME Exchange

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1

EMERGE symbolises the aspirations of a large number of entrepreneurs

participating in the India growth Story and having potential to unlock

value and emerge on a bigger stage.


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SME PLATFORM

SME PLATFORM

Regulatory

Framework


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SME Regulations : Issuers

Issuer Post issue paid up capital

- Rs 10-25 crore : SME/ main Board

- < Rs 10 crore : SME Board only

No cap on Market Cap/ Issue Size

3 year operational history and 2 year

positive cash accruals

Post listing requirements

Corporate governance norms same as

main board

half yearly audited accounts instead

of quarterly on main board

Capital requirement : Rs 20-200 crore.

Traditional & new economy Cos

Capital for growth and exit to early investors

(VCs/ angel investors)

VC assisted companies -next round of

funding.

Relatively early stage Cos could list

Subsidiaries of Large companies looking to

unlock value.

Project SPVs of large groups

Regulations Expected Issuer profile


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SME Regulations : Investors

Institutional Investors could invest and take

significant stakes in companies

Nominated Investor will be attractive to VCs/

PEs and PIPE investors with medium to long term

invest interest

Investors could get VC kind of opportunities

(alpha return opportunity)

HNI investors could invest along with

experienced risk investors

Platform will provide higher liquidity (vis a vis

private space) with daily liquidity windows

SME Regulations Expected Investor profile

Min IPO application and trading

lot : Rs 1 lakh

HNIs, Institutional (FII/DII/

VC/PE/PIPE)/ QIB)

Nominated investors (NIs) can

support underwriting and market

making.

SEBI VC regulations amended toenable NI role for VC firms


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SME Regulations : Intermediaries

Merchant Banks

Merchant Bankers

Same as Main Board (SEBI registered)

No separate class of merchant Banks

Obligations

100% u/writing (15% in own books)

To Ensure 3 year market making

Can tie up with Nominated Investors for

underwriting and market making

Brokers/ Market Makers

All exiting brokers of CM segment eligible

to trade

CM Brokers can act as market makers after

registration with exchange

Obligations of MMs

- 2 way quote in each trading session

- Min depth of quote : Rs 1 lakh

- 75% presence in each trading session

- quote within specified BO spread

Market maker to have inventory equivalent

to 5% of IPO size on the date of allotment.

Market maker arrangements with NIs to be

disclosed in DRHP Max 5 market makers in one scrip


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IPO Process and Migration

IPO Process Migration

DRHP in same format

Only exchange observations on

prospectus

No grading requirement

min 50 allottees

Min application size : Rs 1 lakh

(can be higher)

Hard underwriting of IPOs

Nominated Investors could give

commitment for subscription

Migration from main board to SME and

SME to main board allowed.

Listed companies with paid up capital

between Rs 10 -25 crore may migrate

from SME to main board and main

board to SME , provided,a special resolution is passed

with the support by 66% of non

promoter shareholders.

comply with the listing eligibility

criterion of the respective

platform.

On increase of capital beyond Rs 25

crore, co can migrate to main board

subject to fulfilling listing criterion of

main board.


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Benefits of listing

on SME platform

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MAIN BOARD

SME PLATFORM

VC/ PRIVATE EQUITY
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WHY LIST ?

Recognition & Visibility

Clients, Vendors & community

Long term Capital for growth

Capital for innovation and research

Improves leverage

Exit & Liquidity for early stage Investors/ VCs

Wealth creation for shareholders

ESOPS to attract and retain

Stock as currency for acquisitions


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WHY list on SME Platform

Aggregates risk investors.

Institutional Investors + HNI risk Investors.

More informed investors

Alternate Valuation.

Price preservation

Repeated rounds of capital

Listing on main board after attaining

serious size and with a more broad based

offering

Easier to list. Lower Time & Cost.

Structured IPOs. Focused selling100% underwriting.
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NSES PROPOSTION

NSE SME Platform

Value proposition


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Credible Admission Process

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Merchant Bank Duediligence

Exchange may require

additional third party diligence

Exchange In- principleapproval

Exchange will examine DRHP and

conduct management discussion Provide observations/ seek

clarifications

In-principle approval

Final approval

Submission of final prospectuswith details of underwriting &

market making arrangements Final approval accorded by

exchange

Merchant Bank Due

diligence

Exchange In- principleapproval

Exchange will examine DRHP and

conduct management discussion Provide observations/ seek

clarifications

In-principle approval

Final approval

Submission of final prospectuswith details of underwriting &

market making arrangements Final approval accorded by

exchange

Transparent Efficient Credible


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Going forward : Voluntary adoption of measures to inspire

investor confidence:

Voluntary adoptions

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Though not mandatory, IPO grading will demonstratetransparency and add credibility to the issue

IPO Grading

A reporting agency (PCS or PCA) could be identified byissuer/ merchant banker to report the end use of the IPOproceeds to investors.

End use of Funds monitoring

NSE will launch a tailor made certification module toensure that the compliance officer/ CFO of the issuer iswell versed with compliances and obligations of a listed

company.

CFO Certification

Availability of the CEO for interaction with analysts andresearch agencies and for sharing information on thecompanys performance regularly.

Post-listing Research reports


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SME : Exchange Trading system

SME securities will trade through

existing NEAT trading system of NSE

Risk management system

o Existing clearing settlement

mechanism of NSCCL

o VAR margins applicable

o Existing CM SGF collaterals

could be used

o Existing surveillance

mechanism to b extended to

SME scrips

Trading lots in multiple of Rs 1 lakh

Negotiated trades through block

window Separate odd lot market

Call auctionContinuous

market

Trading system options

Each SME scrip will trade in either continuous or

auction market.

Based on expected investor profile and liquidity

levels, Merchant bank/ issuer can opt for any one

system


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Preparation & Handholding for issuers

Connect to Merchant Bankers

Marketing support for IPOs

Support analyst coverage post listing

NSE Hand holding support


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SME PLATFORM

SME PLATFORMStakeholders in the

journey


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Thank You

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

Exchange Plaza, Bandra Kurla Complex, Bandra (E),

Mumbai 400051, IndiaTel: + 91 22 26598100/ 66418100

Fax: + 91 22 26598120

Web Site: www.nseindia.com

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Introduction to SME Exchange

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