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SME Primer
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Transcript of SME Primer
2Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Outline
• SME Listing - Background
• SME Listing - An Overview of Key Requirements & Eligibility Norms
• Core advantages of SME Listing
• SME Listing - Coming up in a BIG Way…
• Pantomath – Companion in Process
• Annexures
3Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing – Background
4Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SMEs – The backbone of Indian economy
Contribution to GDP 8.7 %
Share of Industrial output 45 %
Share of Exports 40 %
Total Employment
69 million
Job creation every year
1.3 million
Source : Ministry of Micro, Small and Medium Enterprises, GOI
Nation’s 1.3 million SMEs account for 40% of India's total exports
At 48 million, India is second to China in number of SMEs
SMEs employ close to 40% of India's workforce & contributes 45% to India's manufacturing output
SMEs are expected to drive the next-level growth of Indian economy provided they have enabling platform and avenues
SMEs face major problem of capital inadequacy
This problem can be tackled through Capital Market
5Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Valley of Death
Pre seed ExpansionEarly growthSeed/Start up
Very risky
Less risky
Angel Investors
Govt. Grants
Bank Credits
Personal Finances
Angel Investors
Govt. Grants
Bank Credits
Venture Cap
Venture Cap
PE
IPO
IPO
Debt
PE
Partnership
Funding Options
Lifecycle of SME
6Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing Background…
BSE and NSE launched
their respective
platform for SMEs; MCX
too is gearing up
for SME Exchange
The move aims at
providing an opportunity
to SME entrepreneu
rs to raise growth
capital and reap benefits
of listed space
Both BSE & NSE
leverage their
existing ‘equity
platform’ for SME
exchange platform
As per estimate of
SME Chamber of India, over 5000 SMEs
have the potential for listing
A facilitative framework
for SME listing
7Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing – Evolution…
SEBI lays down broad
framework for SME listing
platform
5-Nov-08
PM Task Force
recomm-ends SME
listing exchange
Jan-10
SEBI circular on Guidelines for market
making
26-Apr-10
SEBI Circular
rolling out model listing
agreement for SMEs
17-May-10
Amend-ments in
SEBI Regulations
(ICDR, Merchant
Bankers etc.
18-May-10
SEBI Master
Circular on SME
exchange & Market Making
31-Dec-10
BSE Eligibility
Norms for SME listing
19-Apr-12
BSE SME Exchange
launch
13-Mar-12
SEBI circular
standardizing lot size for SME
exchange
21-Feb-12
SEBI approval to NSE SME
Exchange
14-Oct-11
Amend-mends in
Listing Agreeme
nt
5-Oct-11
SEBI approval
to BSE SME
Exchange
27-Sep-11
8Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing - An Overview of Key Requirements & Eligibility Norms
9Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing - Key Requirements & Eligibility NormsCapital threshold for Listing
SEBI
BSE
NSE SME Exchange
SME/Main Board
Main board
10 Crores
25 Crores
Post
Issu
e Fa
ce V
alue
Cap
ital
Particulars Requirement
Minimum application amount / trading lot INR 1 Lac
Underwriting 100% Mandatory(of which 15% to be done by MB in his own account)
Market making (to be undertaken by MB)
Through Exchange-registered market makers for min 3 years
Public ShareholdingMin. 25%Min. 50 investorsNo post-listing continuous requirement
Provisions for migration to / from Main Board from / to SME Exchange
Offer doc not subject to SEBI
vetting
Refer Annexure for key norms of SEBI ICDR
10Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
• Mandatory facilitation of trading in Demat securities
• Certificate that no winding petition or reference to BIFR
• Mandatory corporate website• Promoters to attend to interview with
Listing Advisory Committee • No change in promoter in preceding 1 year
• Net Tangible Assets : INR 1 crore (as per latest audited results)
• Net Worth (excl. Rev. Reserve) : INR 1 crore or 3 crore, if no track record
• Track record of distributable profits for at least 2 years out of preceding 3 completed FYs
Max : INR 25 croreMin : INR 1 crore
Post Issue Capital (FV)
Other Requirement
Track Record
SME Listing - Key Requirements & Eligibility Norms
SEBI
BSE
NSE
Refer Annexure for key norms of LA
11Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Same as BSE plus additional certification / disclosures on litigation
etc.
• Track record of at least 3 years• Positive cash accruals (EBDT) from
operations and positive net worth for at least 2 FYs preceding the application
• In case the above conditions are not fulfilled, Exchange Authority (MD & Joint MD) to decide
Same as BSEPost Issue Capital (FV)
Other Requirement
Track Record
SME Listing - Key Requirements & Eligibility Norms
SEBI
BSE
NSE
12Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
BSE SME vs. Main Board
Parameters Main Board SME Exchange
Post – issue paid up capital Min INR 10 crore Min INR 1 crore; Max INR 25
crore
Minimum Allotees in IPO 1000 50
IPO underwritingNon Mandatory(Under 50% compulsory subscription to QIB’s)
Mandatory (100% underwritten with MB underwriting 15%)
IPO Grading Mandatory Not mandatory
Track record Stringent track record norms Relaxed track record norms
Offer Document vetting By SEBI By Exchange
IPO Application Size INR 10000 – INR 15000 Min. INR 1 lac
IPO Time frame 6 months 2 – 3 Months
Reporting Requirements Quarterly Half yearly
“SME Exchange
has a winning
edge over Main
Board”
13Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Core Advantages of SME Listing
14Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
• Easy capital & fund availability
• Avoid diminution in value of business
• M&A Currency• Better liquidity – entry &
exit platform
• No tax on LTCG• STCG Tax applicable @ 15%
- reduced rate• No tax on equity infusion in
the company• No tax on ‘distress
business’ purchase
• Enhancing worth• ESOPs – Talent retention
tool• Visibility – Profile building• Governance - Internal
systems
Core Advantages of Listing
Core Advantages of
Listing
15Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing – Coming up in a BIG way…
16Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
* Closing Price as on June 2, 2014
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13Jul-1
3
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
050
100150200250300350400450500
BSE SME Index
Return of 229% in 2013
So far, 50 Companies have been listed on BSE SME Exchange and 4 on NSE Emerge Exchange
SME LISTING - Coming up in a BIG Way…
Sunstar Realty
GCM Securities
Looks Health
CareEco
Friendly
A. Market Cap INR Crores
Pre Issue Net Worth 5.54 8.56 3.06 5.90
Issue Size 10.62 12.18 12.00 7.515
Market Capitalization*
360.73
996.98
54.33
399.48 B. Price Pattern INR Per Share
Issue Price 20.00 20.00 40.00 25.00
CMP (Face Value INR 10)* 181 525 90.55 404
17Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Pantomath – Companion in Process
End-to-end assistance
and hand-holding
by expert &
dedicated Team –
TEAM PANTOMATHPre-IPO Capital
Restructuring and
Preparation1.
Preparation of
Offer Document
2. Offer
Management
3.Lis
ting
Assis
tanc
e
4.
18Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Appointment of Merchant Banker
Due Diligence & Pre-IPO preparation
Preparation of Offer Document
Marketing Strategy
Appointment of other intermediaries
Filing of Offer Document with BSE & Others
Issue Pricing & Allocation
Listing & Market Making
1
3
5
7
98
6
4
Restructuring of capital 2
SME Listing – Way Forward…
19
Let’s Take It Forward….
CAPITAL ADVISORS PRIVATE LIMITEDSEBI Registered Category I Merchant Bankers
Progress with Values
DisclaimerAll data and information is provided for informational purposes only and is not intended for any factual use. It should not be considered as binding / statutory provisions. Neither Pantomath Capital Advisors nor any of its group company, directors, or employs shall be liable for any of the data or content provided for any actions taken in reliance thereon.
Corporate Office108, Madhava Premises Co-operative Society Limited, Bandra Kurla
Complex, Bandra (East), Mumbai - 400 051. Landline:(022) 26598690-91, Fax:(022)26598690
www.pantomathgroup.com
20Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
AnnexuresPantomath’s End-to-end Services
21Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Phase- I: Pre-IPO Capital Restructuring & Preparation
Under the phase, we shall assist you in preparing for IPO and listing on SME Exchange. The services under this phase shall include the following : Assistance in devising appropriate capital restructuring plan; Assistance in statutory compliance management and setting up minimum corporate governance
practices expected by a listed company from the perspective of the following rules / regulations : Companies Act, 1956 Listing Agreement applicable for SMEs BSE listing norms SEBI ICDR Regulations;
Assistance in appointment of market intermediaries and other parties including the following; Underwriters Market Makers Registrars to Issue Bankers to Issue PR Agency, Printer etc.;
Assistance in devising a complete IPO plan and strategy including the likely post-issue shareholding distribution pattern.
22Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Phase- II: Documentation Preparation
We shall assist you in drafting of IPO Offer Document and other important agreements, documents and resolutions necessary for an SME IPO process. An indicative list of important documents is as under for easy understanding :
IPO Offer Document, Tripartite Agreement with NSDL, CDSL and Registrar to Issue, Underwriting Agreement, Market Making Agreement, Agreement with Bankers to Issue, Agreement with Registrar to Issue, Board / Shareholders’ Resolutions, Certificates, Letters of Representations etc, Draft of public advertisements, notices etc, Forms / Applications to be filed with BSE, ROC and other regulatory office.
23Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Phase- III: Offer Management
Once all pre-IPO preparations would be over including meeting the eligibility criteria, appointment of other market intermediaries, and drafting of offer document, we shall initiate the actual process of IPO. Our services under the phase shall include end-to-end IPO activities :
Filing of IPO Offer Document with BSE and other regulatory offices like SEBI and ROC; Follow-up with BSE and ROC for their approvals; Coordinating and assistance in interview with SE Listing Advisory Committee, Assistance in execution of agreements with other market intermediaries; Assistance in launch of IPO and coordinate with other parties including PR Agency,
Printers for adequate public advertisement, distribution of application forms as required statutorily;
Monitoring the flow of applications and keeping a real-time discussion with the management of the Company;
Coordinating with bankers and registrars for deposit of application moneys and finalization of allotment list in consultation with the stock exchange .
24Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
Phase- IV: Listing Assistance
Finally, post IPO closure and finalization of allotment, we shall initiate the activities for listing of equity shares of the Company on SME Exchange. Our scope of services under this phase shall include the following:
Assistance in completing allotment of shares to the successful allotees, Preparing listing application , Filing of listing application with Stock Exchange(SE), Follow-up with SE and obtain listing approval, Assist in trading formalities and obtain SE’s trading approval, Assist in making required public disclosures as required statutorily, Coordinating for continuous market making for 3 years.
25Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
AnnexuresSome Key Norms of Listing Agreement &SEBI ICDR
26Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SEBI ICDR As Applicable to SMEs
SEBI ICDR applies to SME listing with specific relaxations Offer document requirements and eligibility norms relaxed
Appointment of Merchant Banker, and other intermediaries required Lead Merchant Banker to the issue, Rights , obligations and responsibilities relating to disclosures, allotment, refund, and
underwriting obligations Book building or fixed priced issue permitted Lock-in conditions apply
20% of post-issue capital to be locked in for 3 years; balance promoter shareholding to be locked in for 1 year
Non-promoter pre-IPO shareholding to be locked in for 1 year with exception to ESOP shares and shares held by VCF or FVCIs for more than 1 year pre IPO
Locked-in shares permitted to be transferred inter se promoters incl. new promoter(s)
27Pantomath Capital Advisors Pvt. Ltd. (SEBI Registered Category I Merchant Bankers) – A Pantomath group entity
SME Listing Agreement
All SMEs getting listed need to enter into Listing Agreement (LA) with the relevant stock exchange.
BSE and NSE has adopted model LA released by SEBI.Key Requirements include the following :
Half-yearly results (Audit / limited review) Half-yearly shareholding pattern Advance notice of Board meetings with specified agenda (e.g. dividend, bonus, buy
back etc.) In-principle approval for any further issuance of shares Disclosure of price sensitive information Annual report containing inter alia full financials, consolidated financials, related party
disclosures etc. to be uploaded on corporate website Full annual report to be emailed; Abridged annual report to shareholders not on
email ids Compulsory migration to main board after the cut- off ceiling