introduction to sme exchange
TRANSCRIPT
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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
http://www.google.co.in/imgres?imgurl=http://sisutek.com/blog/wp-content/uploads/2010/04/dreamstime_11193063.jpg&imgrefurl=http://www.sisutek.com/blog/&usg=__LxBdXkRz4wIRFA8uASe_DyebQy8=&h=480&w=480&sz=63&hl=en&start=723&zoom=1&tbnid=2PHq1Kts_XFlOM:&tbnh=129&tbnw=129&ei=kAqdTpbNMMOjiAfan_DICQ&prev=/search?q=value+proposition&start=720&hl=en&sa=N&tbm=isch&prmd=ivnsb&itbs=1 -
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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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