Three firms graduate from SME platform to main bourse

Nearly three years after small and medium enterprise (SME) exchanges were introduced, the first batch of companies has made the transition of moving to the main bourse. Three companies listed on the BSE SME exchange have migrated to the main platform. Another company listed on the National Stock Exchange's SME platform, Emerge, could move soon. Incidentally, the new companies added to the main exchange is only two less than the number of initial public offerings (IPOs) witnessed last year.

The concept of SME exchange was introduced to help the small-sized companies raise equity capital. The regulatory and disclosure requirements on the SME bourses is much relaxed compared to the main exchanges.

According to existing norms, companies that have completed two years on the SME platform and have achieved post-issue paid-up capital of Rs 10 crore and above are eligible for migration to the main board.

Bronze Infra-Tech, Anshu's Clothing and SRG Housing Finance migrated from the BSE SME platform to the BSE mainboard in February.

"The migration of these companies to the mainboard platform acts as a motivation for others to make that jump as well. Of course, it is not binding on a company to make the move, but the option is there for those who want to make the jump," said Ajay Thakur, head, BSE SME platform.

Companies with a paid-up capital of anywhere between Rs 10 crore and Rs 25 crore have the option of moving to the mainboard. Once the company achieves a post-issue paid-up capital of Rs 25 crore, it is required to apply for listing on the mainboard. BSE SME recently revised the entry norms for the platform. Companies are now required to have a post-issue paid-up capital of at least Rs 3 crore, from Rs 1 crore earlier.

The BSE SME platform will complete three years next month, while the NSE SME will complete three years in September this year. In the past three years, 80 companies have listed on the BSE SME platform. Of these, 28 companies are actively traded. On the NSE Emerge, six companies have been listed.

The market-capitalisation of the BSE SME platform was Rs 8,667 crore as on February 20. According to merchant bankers, many companies are eager to make the move to the mainboard listing and working towards meeting the requirements.

"Companies are certainly excited about moving to the main board. Main board migration facility incentivises promising SMEs to grow and achieve the threshold for graduating to the next level," said Mahavir Lunawat, group managing director at Pantomath Advisory Services group, which has handled many SME IPOs. "Main board migration decision should, however, be based on relevant factors such as the company's business life cycle, internal systems and controls. On SME platform, companies get benefits of simplified compliance regime and lesser disclosures. On migration, however, companies no longer remain subject to the requirements of market-making and minimum lot size (of Rs 1 lakh)," said Lunawat.

For companies on the SME platform, market-making is facilitated by merchant bankers for a period of three years. Lot-sizes for trading in these securities are fixed at a minimum of Rs 1 lakh. Also, companies are required to furnish corporate earnings numbers every half-year on the SME exchange and on their respective websites.

For companies on the mainboard, the facility of market-making by merchant bankers does not exist and there are no specific limits for lot-sizes. Disclosure requirements are also more stringent than those on the SME platform. Results on the mainboard are declared quarterly.