SME IPO Migration to Mainboard

The migration of listed SMEs to the mainboard means that their listed securities will be transferred from the SME platform to the mainboard exchanges.

By migrating from the SME exchange to the mainboard, small and medium-sized enterprises can start trading on the mainboard exchanges. SMEs can trade on the mainboard exchanges if they fulfil the migration criteria/eligibility by the BSE and NSE.

Small and Medium Enterprises (SMEs) stocks have significantly outperformed after migration from the SME platform to the mainboard exchanges BSE and NSE. Migration of SMEs to the main board can be beneficial for issuers. The benefits of migrating SMEs to the mainboard exchanges are explained below:

• The shares will be listed on both the stock exchanges, i.e. NSE and BSE.
• Increases public reach by attracting more retail investors to invest.
• Improves the performance of issuers and increases market capitalization and performance of stocks.
• Involvement of market makers is not required once an SME has migrated to the mainboard.
• There will be no regulations on the number of trading lots for trading in mainstream companies.

Let us understand the required documents and eligibility for migrating SMEs to the mainboard:

1. BSE SME Listed Company Migration

1.1. Eligibility Criteria for BSE SME to BSE Mainboard Migration

A company listed on the SME platform of the BSE can apply for migration to the Main Board platform if the SME fulfils the following conditions;

1. Paid up capital of more than Rs 10 crores post issue and a minimum market capitalization of Rs 25 crore.
2. The SME must have a net worth of at least Rs 15 crore in the previous two financial years.
3. The SME must have a positive operating profit in two out of three years.
4. At the Annual General Meeting, at least two-thirds (2/3) of the shareholders, excluding the company's promoters, must pass a special resolution in favour of the migration.
5. The minimum period for listing on the BSE SME platform should be three years and there must be at least 250 public shareholders before the company migrates to the mainboard stock exchange.
6. The migrating SME's promoters and/or directors must not have been debarred or banned by SEBI.

1.2. Documents Checklist for BSE SME to BSE Mainboard Migration

The migration norms for the various phases of migration from the SME platform to the BSE mainboard are listed below:

List of documents required for the migration from BSE SME to BSE Mainboard at the time of In-Principle approval:

• Certified copy of the resolutions of the Board of Directors and the shareholders on the migration.
• A printed copy of the invitation to the AGM/EGM was sent to the shareholders to seek their approval for the migration.
• Voting record reflecting the results of the public shareholder vote.
• Certificate from the Company Secretary or the Managing Director in the prescribed form.
• Hard and soft copies of the Information Memorandum duly signed by the Company Secretary or Managing Director.
• No complaints or a clean track record of the company
• Payment of processing fee of Rs 2,00,000 or 0.05% of market capitalization, whichever is higher. (Market Cap is the closing price of one trading day before making the application multiplied by the number of shares.) For bank account details use the email address ipo@bseindia.com.
• The last shareholding of the company is not older than 15 days when the migration application is submitted to the stock exchange.
• Confirmation from CS, MD or Compliance Officer that the promoters or directors have not violated the practices.
• Particulars of the promoters and directors of the PAN company. (In Excel sheet and pdf).
• Corporate Governance Compliance Report duly signed by the MD or Compliance Officer.
• Certificate from a merchant bank auditor or compliance officer showing the weighted average market capitalization for the last 20 trading days.

List of documents required for the migration from BSE SME to BSE Mainboard at the time of final migration:

• Main Board Listing Agreement along with board resolution.
• Detailed Listing Application to be filed with the Exchange.
• Latest Shareholding pattern as per Regulation 31 and financials as per Regulation 33 of SEBI (LODR) Regulation, 2015 (Not older than 15 days from the application date).
• Initial Listing Fees: Rs. 20,000 plus applicable taxes.
• Annual Listing Fees (“ALF”) are to be paid as per the Schedule of Listing Fees for Equity minus ALF paid by the company for SME Segment.
• Further, if the Annual Listing Fees paid by the company for SME Segment are more than the Annual Listing Fees to be paid as per the Schedule of Listing Fees for the Equity Segment then no additional Annual Listing Fees shall be charged to the company on final migration.
• In-principal approval received from the other Exchanges for Listing (if applicable).

2. NSE SME Listed Company Migration

2.1. Eligibility Criteria for NSE SME to NSE Mainboard Migration

Companies seeking to migrate to the NSE mainboard must meet the following NSE Emerge migration criteria listed below;

1. The paid-up capital must not be less than Rs 10 crores. For this criterion, paid-up capital after the issue is considered.
2. The market capitalization of SMEs must not be less than Rs 25 crores.
3. SMEs should have been listed on the NSE for at least 3 years.
4. The company must have made a positive profit after tax in the immediately preceding financial year before submission of the migration application.
5. The company must have a net worth of at least Rs 50 crore after deducting accumulated losses.
6. The total number of public shareholders should be at least 1000 on the last day of the previous quarter from the date of application.
7. The SME company should have a positive operating profit (earnings before interest, depreciation, amortisation and tax) in the three fiscal years preceding the migration application.
8. The company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR) and there is no liquidation petition under the Insolvency and Bankruptcy Code against the company and promoting companies.
9. The stock exchange and market regulatory authorities have not imposed any disciplinary action or regulatory violations against the company in the last three years.
10. No winding-up petition has been filed against the applicant company by the NCLT.
11. SMEs should have informed the stock exchanges of all material litigation and regulatory actions.
12. Cooling-off period of two months from the date on which the security was removed from the trade-to-trade category or any other surveillance measure by other exchanges on which the security was actively listed.
13. Redressal mechanism of Investor grievance.
14. PAN and DIN no. of Director(s) of the Company.
15. Change in Control of a Company/Utilisation of funds raised from the public.

2.2. Documents Checklist for NSE SME to NSE Mainboard Migration

Detailed document list for the NSE SME migration to the NSE Mainboard:

• The SME company migration confirmation must be filled in the format prescribed by the Exchange.
• Details of the company (SCORES authentication ID, investor grievance redressal mechanism, changes in governance since listing etc.) in the prescribed format.
• Auditor's certificate on the net assets of the company
• Auditor's certificate on utilisation of funds raised from the public
• Certified copy of the board resolution for the proposed transfer from SME to Main Board
• Certificate from the company on compliance with SEBI (Listing and Disclosure Requirements) regulations
• Certified copy of the postal ballot to obtain shareholders' approval for the change.
• Information Memorandum
• Report of the Supervisor of Elections showing the results of the votes cast by the project sponsors and the public
• Certified copy of the shareholder resolution approving the conversion.