Sebi Unveils New Platform For SME Listing

Tags: SEBI,  Securities and Exchange Board, Securities and Exchange Board of India, 

The Securities and Exchange Board of India (Sebi) has ruled out the need for a separate exchange for small and medium enterprises (SMEs). Sebi chairman C.B. Bhave said that a separate platform for listing and trading in small- and medium-sized enterprises would be permitted on the existing exchanges. This would make the proposal cost-effective.

Norms. Companies with a paid-up capital of less than and up to Rs 25 crore would be able to list on the SME platform. If the paid-up capital of a firm rises above the Rs 25-crore mark following the issue, the firm will not be eligible for using the platform reserved for SMEs and it will have to move on to the regular platform. Exemptions. Companies listed on the SME platform would be exempted from certain eligibility norms applicable for initial and follow-on public offers. For instance, norms like profit track record for a specified previous period, which is applicable to other companies, would be waived off. Further, to keep compliance costs low for such companies, they have been exempted from quarterly declaration of financial results. Instead, they would be required to declare earnings on a half- yearly basis.

Sebi has allowed companies to go for pure auction of public issues instead of a price band for institutional investors. This means there will not be any price band and the company may just give the floor price to institutional investors who can then bid. However, if a company decides to follow this option, non-institutional investors (comprising retail investors, high net worth individuals, and employees) will have to be given shares at the floor price.

Says Prithvi Haldea, chairman and managing director, Praxis Consulting & Information Services: “SMEs are perceived to be high-risk, high-reward investment avenues. The regulator has tried to ensure that investment-savvy and well-informed investors participate in investing in these companies. The minimum contract size has, therefore, been fixed at Rs 1 lakh, which will discourage several small retail investors from investing in these perceived high-risk high- reward returning companies.”