SME IPO Consultants

Our Services

Fund Raising through SME IPO

SME IPO has been beneficial for the Indian Economy and creates value unlocking for Companies, Promoters and Investors apart from incremental Government Tax Revenue. SME IPO leads to Equity Fund Raising and also works as a tool for Exit Opportunity for Investors. It also strengthens company’s ability to reduce its cost of Debt along with realising the power of Listed Shares which can work as Collateral. SME IPO has inbuilt provision for 100% Underwriting of the Issue and relaxed post listing compliances combined with reduced timelines of IPO process. SME IPO also opens the gate towards listing on BSE/NSE mainboard through migration process. Attractive issue prices under SME IPO are encouraging the interest of QIB Investors and Retail Investors in this booming Indian Capital markets

Till June 2024, 1008 companies have raised INR 17,850 crore through SME IPOs (BSE SME and NSE EMERGE platforms) across 60+ industries with cumulative market cap of INR 3.36 Lakh crores as on 30th June, 2024 resulting in average 430% Incremental Valuation over Issue Price. Last 3.5 years have been a milestone for SME IPOs as 459 companies got listed at SME Stock Exchanges and raised INR 11,250 crore which represents 45% in Number and 63% in value of total SME IPOs. This upsurge was primarily driven by robust Indian Capital markets and heightened Investor interest showcasing the power of Small and Medium Enterprises (SME) in India.

We can handhold growing, Profitable companies, across all Industries for a successful SME IPO at BSE SME / NSE Emerge Stock Exchanges. We have strong network of Capital Market Investors including prominent QIB’s and Anchor Investors which can assure Fund Raising and Value Creation for Companies and Promoters within time bound manner. Our unique understanding of Valuation, Businesses across Industries, Legal requirements, Capital Market trends and strong Network of Institutional Investors differentiate us from other advisors operating in this space.

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Fund Raise through Other Modes

Transique Corporate Advisors work with emerging growth-stage companies, angel-funded startups and companies looking for fundraising (Venture Capital /Private Equity/ SME IPO (BSE SME/NSE EMERGE)/Quasi Debt and Debt). We are providing end to end transaction advisory services related to valuation, financial model preparation/review, preparation/review of Teaser/pitch documents and complete deal support including due diligence, deal Structuring, deal advisory, deal Negotiation, Legal, Regulatory & Tax advisory, Legal documentation and also post deal support.

Our team members have a diverse and significant track record working with entrepreneurs, CEO’s, CFO’s and Senior Professionals. We provide Pre and Post Funding for Companies and investors. Being Chartered Accountants, Registered Valuers and also as a SEBI-registered Category I Merchant Banker (through our associated firm), we provide valuations for various tax, regulatory and financial reporting and for management / Investor assessment purposes in India.

Our fund raising team assist clients with both their equity and debt requirements and provide advisory services related to private equity, mezzanine and debt financing.

Our team interacts closely with private equity funds, venture capital funds, high net worth investors on an ongoing basis and has a good understanding of their focus, investment criteria, thesis, philosophy and preferences which help us to facilitate the most appropriate investor-company fit, thus delivering the best value.

On the debt side, we advise on raising funds from banks, multilateral, NBFCs and credit funds for corporate and asset-based lending, securitization, project debt, senior debt, acquisition financing and recapitalizations.

The type of investors we raise funds from:

Venture capital (VC) funds
Private equity (PE) funds
Strategic investors and corporate ventures
Family offices
High net worth Individuals (HNI’s)
QIB’s and Anchor Investors (SME IPO)

We raise all form of finance, including:

Equity financing
Debt financing
Quasi-Debt financing
Acquisition financing
ECB
SME IPO (BSE SME/NSE EMERGE)

We assist our clients by:

Understanding financing requirements
Preparation/Review of financial model with underlying assumptions
Preparing Teaser, Pitch Book and information memorandum
Approaching and discussing the deal with potential investors
Analyzing the offers and negotiating terms
Identify potential areas impacting valuation and suitably addressing the same
Identify potential transaction structure (critically evaluate the same from a tax, regulatory, business and valuation perspective, maximise tax efficiencies in the structure, discussions with the potential investor on the transaction structure etc.)
Support in negotiation to the management
Providing inputs on the risk factors identified by the investor / buyer (including contingent liabilities)
Capital gains tax planning on exit, planning use of funds realised
Providing structure for potential exit to investor etc.
Protecting interests of the management team (compensation re-alignment to market, roles re-alignment, ESOP, lock ins etc.)
Co-ordinating the overall due-diligence (including providing meaningful insights to the diligence issues)
Closing of the transaction

We extend extensive support in review of definitive agreements such as share purchase agreement, share subscription agreement, shareholder agreement, terms of non-compete, use of brands, related party arrangements, indemnity structures etc.

We understand the challenges pertaining to Investor Funded Companies

Presence of complex capital structures, liquidation preferences, tag along and drag along rights and other terms that are common in Investor Funded Companies
Implication of these terms for the relative value of various layers of preference and equity shares within the capital structure
Thereby rendering correct advise to the Company in Deal Structuring by identifying, and guiding decisions on business growth strategies, strategic alternatives, capital allocation, and restructuring that impact the bottom line and drive shareholder value.

SME IPO FAQs

Concepts and Key trends of SME IPO

1. What is SME IPO?

A Public Limited Company (“Issuer”) can raise funds from public by issuing its fresh equity shares through an Initial Public Offer at the SME segment of the nationwide Stock Exchanges i.e. NSE Emerge or BSE SME, subject to the specified conditions.

2. How many SME companies are listed till date on NSE Emerge and BSE SME Index and how much funds have been raised by them through SME IPO? What is the market value of these companies as on date?

3. How many companies listed on SME stock Exchanges have now been migrated to mainboard stock exchanges?

Till June 2024, more than 323 companies have been migrated to BSE and NSE Stock Exchanges from out of 1008 companies listed on BSE SME and NSE Emerge.

4. How does an SME IPO add value to all the stakeholders?

For Example: 950 companies who raised funds of about INR 16000 Crore through SME IPO platform are now worth INR 2,50,000 Lakh Crore.

SME IPO V/S MAINBOARD IPO

5. How SME IPO is different from Mainboard IPO?

	Mainboard IPO	SME IPO
Minimum Paid up Cap	INR 10 Cr	No Minimum Requirement
Minimum Allottees	1000	50
Underwriting	Not Mandatory	100% underwriting (Min. 15% underwriting by Merchant Banker)
Market Maker	Not Mandatory	Mandatory for 3 Years
Regulatory Approval	By SEBI	By Stock Exchange
Net worth	More than INR 1 Cr in each of 3 preceding Financial Year	Positive for NSE SME more than INR 1 Crore for 2 preceding FY for BSE SME
Listing Time Frame	Approx. 18-24 Months	Approx. 4-6 Months
Minimum Issue Size (in %)	0.25	26.25% (25% + 1.25% Market maker)
Issue Size (in Value)	Practically issue Size is upwards of INR 200 Cr	Practically issue size is upto INR 200 Cr
Track Record	3 years	3 years
Profitability	Min. Avg Operating Profit of INR 15 Cr in last 3 FY with operating profit in each of last 3 years	Positive EBITDA in 2 out of 3 Financial Year
Post Listing Compliances (Financials & Shareholding)	Quarterly	Half-Yearly
Listing Fixed Cost	Approximate 2% of Fund Raise	INR 20-25 Lakhs
Migration to Mainboard	NA	After 3 Years or Where Post Issue Paid Up Capital is more than INR 25 Cr, subject to NSE/BSE Approval

Company Preparation for SME IPO

6. What formalities (checkpoints) are required to be complied with before listing on an SME Exchange?

It is necessary to convert the proprietorship / firm / Private company to a Public Limited Company
Establishing the appropriate capital structure.
Increasing the Authorized Share Capital is required based on the post-issue capital structure.
Approval of the Board of Directors and Shareholders of the Company is necessary to approve the issuance of shares.
Restructuring the company’s financials to align with the longer-term vision is essential.
Gathering information for the preparation of the Draft Red Herring Prospectus (DRHP) and committing time and resources of the legal, finance team, management, and promoters are required.
Appointment of a Company Secretary and CFO is necessary.
Appointing 50% Independent Board members, including at least one female Director, is mandatory.
Restating financial statements for the last three years through Peer Reviewed Auditors (Financials shall not be older than six months at the time of submission of the Offer Document with the stock exchange) is required.
The company should have its own website and logos of the, if not already in place, they should be prepared.

Eligibility and Requirements of SME IPO

7. For how many years is the company's prior track record needed for an SME IPO?

Track record of at least three years is required of:
i. The applicant seeking listing; or
ii. The promoters*/promoter company, incorporated in or outside India or,
*Promoters mean one or more persons with minimum 3 years of experience in the same line of business and shall be holding at least 20% of the post issue equity share capital individually or severally
iii. Proprietary / Partnership firm and subsequently converted into a Company (not in existence as a Company for three years) and approaches the Exchange for listing.

8. What are the minimum profitability requirements for an SME IPO?

EBITDA should be positive in 2 out of 3 latest financial years preceding the application date of SME IPO.

9. What are the minimum or maximum requirements for paid-up capital?

The Post Issue Paid up Capital should be Maximum of Rs. 25 crores. There is no minimum paid up Capital requirement for a SME IPO either pre issue or post issue except for broking companies on BSE SME.

10. What are the minimum requirements for Tangible Assets?

The Net Tangible Asset should be Rs 3 crores in last preceding (full) financial year for getting list on BSE SME. There is no requirement of Tangible Assets to list on NSE Emerge.

11. What are the minimum requirements for Net Worth?

The Net worth should be Minimum of Rs. 1 crore for 2 preceding full financial years for getting list on BSE SME. Whereas only positive net worth is required to list on NSE Emerge.

12. What are the requirements for the Leverage Ratio?

The Leverage Ratio should be Maximum of 3:1 for getting listed on BSE SME. However, relaxation may be granted to finance companies. In case of NSE SME, there is no such requirement of Leverage Ratio.

13. What would be the minimum lock-in period for shares held by the Promoters?

Minimum Promoter contribution i.e. 20% of Post Issue Capital would be locked in for 3 years from the date of allotment in the IPO.
Excess of Minimum Promoter contribution: 1 year from the date of allotment in the IPO

14. What would be the minimum lock-in period for shares held by persons other than Promoters?

The entire pre-issue capital held by persons other than the promoters shall remain Locked in for 1 year from the date of allotment in the IPO.

Fixed Issue Pricing Method V/S Book Building Issue Pricing Method

15. What is difference between Fixed Issue Pricing Method and Book Building Issue Pricing Method?

	Book building Issue	Fixed price issue
Meaning	This is a process where the issuing company does not fix the IPO price in advance. Instead, the company announces a price range within which investors can bid for the shares.	The company sets a specific offer price before opening the IPO for subscription. This predetermined price remains constant throughout the subscription period, and investors can subscribe to the shares at the fixed offer price.
Retail Individual Investors	Minimum 35% of the issue	Minimum 50% of the issue
Non-Institutional Investors	Minimum 15% of the issue	Remaining 50% to: individual applicants other than retail individual investors; and other investors including corporate bodies or institutions, irrespective of the number of specified securities applied for;
Qualified institutional buyers	Max. 50% (5% of which shall be allocated to mutual funds) of the issue

Legal Issues of SME IPO

16. What is the minimum application size?

One lakh Rupees per application

17. What is the minimum offer to public in SME IPO?

There is need to comply with the minimum offer to the public as per the provisions of clause (b) of sub-rule (2) of rule 19 of Securities Contracts (Regulations) Rules, 1957.

18. How many minimum or maximum number of allottees are required for SME IPO?

The number of allottees should be at least 50.

19. What are the underwriting requirements in an SME IPO?

100% underwriting (minimum 15% by the Merchant Banker itself) is mandatory for SME IPO.

20. Who is the market maker, and what are the requirements for a Market Maker for an SME IPO?

The market maker aids in addressing liquidity challenges faced by stocks of small and medium enterprises (SMEs). Market making is a compulsory requirement for all securities listed and traded on the SME Exchange. Investment banks facilitate market making through brokers operating in the SME segment for a minimum of 1.25% of post issue up capital for the minimum duration of three years, starting from the date of the security’s listing.

21. What is the cooling period of a company if its SME IPO rejected by exchange?

The application of the applicant company should not have been rejected by the Exchange in last 6 complete months.

22. What is the minimum application and lot size?

The minimum application and trading lot size shall not be less than Rs. 1,00,000. Standardize lot size for Initial Public Offer proposing to list on SME exchange/platform, as given under:

Price Band (in Rs)	Lot Size (No of shares)
Upto 14	10000
more than 14 upto 18	8000
more than 18 upto 25	6000
more than 25 upto 35	4000
more than 35 upto 50	3000
more than 50 upto 70	2000
more than 70 upto 90	1600
more than 90 upto 120	1200
more than 120 upto 150	1000
more than 150 upto 180	800
more than 180 upto 250	600
more than 250 upto 350	400
more than 350 upto 500	300

23. How much time does it take to go public?

Approx. 6 months subject to fulfilment of statutory requirements and readiness of the promoters and management.

24. What are the post-listing compliances for the company?

Company will have to file their financials and shareholding pattern to exchange half-yearly after listing on SME Exchange.

25. What are the Capital gain tax benefits of listing on the BSE SME or NSE Emerge platforms?

Unlisted equity holdings are subject to short-term capital gains taxation at rates potentially reaching 30%, while long-term capital gains tax stands at 20%. In contrast, listed securities enjoy a more favourable tax regime, with short-term capital gains taxed at 15% and long-term capital gains taxed at 10%, contingent upon the payment of Securities Transaction Tax by the investor.

Application Procedure for SME IPO

26. What is the application procedure for an SME IPO?

Submission of DRHP/Draft Prospectus – These documents are prepared by the Merchant Banker and filed with the Exchange as well as with SEBI as per requirements.
Verification & Site Visit – Exchange verifies the documents and processes the same. A visit to the company’s site shall be undertaken by the Exchange official. The Promoters are called for an interview with the Listing Advisory Committee.
Approval – Exchange issues an In Principle approval on the recommendation of the Committee, provided all the requirements are compiled by the Issuer Company.
Filing of RHP/Prospectus – Merchant Banker files these documents with the ROC indicating the opening and closing date of the issue. Once approval is received from the ROC, they intimate the Exchange regarding the opening dates of the issue along with the required documents.

Criteria for Migration from SME Stock Exchanges to Mainboard Stock Exchanges

27. Can an SME Platform company migrate to the mainboard, and what are the criteria?

Company can migrate to migrate to mainboard via two routes i.e., Voluntarily and under Regulation 280 of SEBI (ICDR) Regulations 2023

Voluntarily

An issuer, whose post-issue face value capital is more than ten crore rupees and up to twenty-five crore rupees, may migrate its specified securities to the main board of the stock exchanges subject to special resolution through postal ballot and fulfilment of the eligibility criteria for listing laid down by the Main Board.

Criteria	BSE	NSE
Listing period	The applicant company is listed on SME Exchange for min. atleast 3 years.	The applicant company is listed on SME Exchange for min. atleast 3 years.
Public Shareholders	Minimum of 250 public shareholders	Minimum of 1000 public shareholders
Net-worth	Min. Net worth of Rs. 15 crores for 2 preceding full financial years.	The net worth of the company should be at least 75 crores
Earnings before Interest, Depreciation and Tax (EBITDA) and Profit After Tax (PAT)	Positive operating profit (earnings before interest, depreciation and tax) min. in any 2 out of 3 financial years and has positive Profit after tax (PAT) in the immediately. preceding Financial Year of making the migration application to Exchange.	The applicant company should have positive cash accruals (Earnings before Interest, Depreciation and Tax) from operations for each of the 3 financial years preceding the migration application and has positive PAT in the immediate Financial Year of making the migration application to Exchange.
Promoters Holding	Promoter(s) shall be holding at least 20% of equity share capital of the company at the time of making application.	Promoter(s) shall be holding at least 20% of equity share capital of the company at the time of making application.
Paid up Capital & Market Capitalisation	Paid-up capital of more than 10 Crores and Market Capitalisation should be minimum Rs. 25 Crores	The paid-up equity capital of the applicant shall not be less than 10 crores and the capitalisation of the applicant’s equity shall not be less than 25 crores

Migration to main board due to Increase in capital by way of further issue: As per Regulation 280 of SEBI (ICDR) Regulations 2023

Where the post-issue face value capital of an issuer listed on a SME exchange is likely to increase beyond twenty-five crore rupees by virtue of any further issue of capital by the issuer by way of rights issue, preferential issue, bonus issue, etc. the issuer shall migrate its specified securities listed on a SME exchange to the Main Board and subject to the fulfilment of the eligibility criteria for listing of specified securities laid down by the Main Board

Provided that no further issue of capital by the issuer shall be made unless:

The shareholders of the issuer have approved the migration by passing a special resolution through postal ballot wherein the votes cast by shareholders other than promoters in favour of the proposal amount to at least two times the number of votes cast by shareholders other than promoter shareholders against the proposal.
The issuer has obtained an in-principle approval from the Main Board for listing of its entire specified securities on it.