On 8th October 2013 SEBI has come up with a new
regulation Securities and Exchange Board of India (Listing of Specified
Securities on Institutional Trading Platform) Regulations, 2013. The objective
of this regulation is to grant securities of small and medium enterprise trading
option exclusively on the institutional trading platform.
"Institutional
trading platform" means the trading platform in a SME exchange for
listing and trading of specified securities of small and medium enterprises for
informed investors.
Eligibility Norms:
SME shall satisfy the following conditions to get its
securities listed –
a.
the company, its promoter, group company or
director does not appear in the wilful defaulters list of RBI;
b.
there is no winding up petition against the
company that has been admitted by a competent court;
c.
the company, group companies or subsidiaries
have not been referred to the Board for Industrial and Financial Reconstruction
within a period of 5 years prior to the date of application for listing;
d.
no regulatory action has been taken against the
company, its promoter or director, by the Board, RBI, IRDA or MCA within a
period of 5 years prior to the date of application for listing;
e.
the company has not completed a period of more
than 10 years after incorporation and its revenues have not exceeded Rs. 100
cr. in any of the previous financial years;
f.
the paid up capital of the company has not
exceeded Rs. 25 cr. in any of the previous financial years;
g.
the company has atleast one full year’s audited
financial statements, for the immediately preceding financial year at the time
of making listing application;
In addition to the above it should also satisfy any one of
the following criteria –
a.
Atleast one AIF, venture capital fund or other
category of investors/lenders approved by the Board has invested a minimum
amount of Rs. 50 lakhs in equity shares of the company, or
b.
Atleast one angel investor, has invested a
minimum amount of Rs. 50 lakhs in the equity shares of the company through such
association/group, or
c.
The company has received finance from a
scheduled bank for its project financing or working capital requirements and a
period of 3 years has elapsed from the date of such financing and the funds so
received have been fully utilized, or
d.
A registered merchant banker has exercised due
diligence and has invested not less than Rs. 50 lakhs in equity shares of the company
which shall be locked in for a period of three years from the date of listing,
or
e.
A QIB has invested not less than Rs. 50 lakhs in
the equity shares of the company which shall be locked in for a period of three
years from the date of listing, or
f.
A specialized international multilateral agency
or domestic agency or a public financial institution as defined under section 4A
of the Companies Act, 1956 has invested in the equity capital of the company
Listing of
Securities:
On fulfilling the above criteria the company can get its
securities listed on Institutional trading Platform. However, such listing
shall not be accompanied by any issue of securities.
It can raise capital through private placement or rights issue without an option for renunciation of
rights.
Objective:
In my opinion the main objective of coming up with this
regulation is to provide greater liquidity to the SME securities and to make
the security more stable by putting mandatory investments from the VCF, AIF,
Merchant Bankers, etc.
However, there seems to be a contradiction from the concept
of SME IPO recently launched by SEBI.
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