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SME IPO/ Stock Exchange Listing
SME

BSE SME listed firms' market value crosses Rs 10,000 cr mark

The market valuation of companies listed on the BSE's SME platform today crossed the landmark Rs 10,000 crore mark within two years of its launch.

The market valuation of companies listed on the BSE's SME platform today crossed the landmark Rs 10,000 crore mark within two years of its launch.

Commenting on the achievement BSE MD & CEO, Ashishkumar Chauhan said: "Reaching market capitalisation of Rs 10,000 crore in listed BSE SME companies is a small but significant step for Indian capital markets.

"BSE is delighted to be of help to SME companies in raising the capital, creating wealth for various stake holders, bringing corporate governance and visibility and providing liquidity on the platform. MSME sector is one of the largest provider of jobs in India and engine of job creation."
The BSE SME platform currently has 82 companies listed on its platform. Additionally, 16 more companies are at various stages of listing.

"Regulatory framework set up by regulator SEBI and policies by Ministry of Finance have helped create a conducive environment for SME companies to list on BSE SME platform," Chauhan added.

India has a huge potential for SMEs and the success at BSE SME in less than 3 years of its setting up has opened up important avenues for high growth SME companies to raise funds for their growth from public, he said.
This also proves that Indian investors are willing to invest in right companies, however small, Chauhan noted.

Recently, the market cap of companies listed at the BSE crossed Rs 100 lakh crore milestone.

BSE is the world's largest stock exchange in terms of the numbers of companies listed on its platform which stands at 5,530.



Need for SME Exchange

Despite the benefits associated with public listing, the SMEs were not able to access the capital markets through extant Stock Exchanges due to several factors such as stringent regulatory, disclosure and financial requirements and the like.

The creation of a separate stock exchange for SMEs has been on the policy makers' agenda for quite some time, and finally in March, 2012, SME Exchange was launched. A dedicated stock exchange for SMEs would allow them accessing capital markets easily, quickly and at lesser costs.

The need of a dedicated SME Exchange can be attributed to several factors including the following :


  1. A dedicated SME exchange will provide SMEs with equity financing opportunities to grow their business - from expansion to acquisitions
  2. Listing the company would facilitate expansion of the investors base, which in turn help company get secondary market for equity financing, including private placement.
  3. With the availability of equity financing options, the debt burden can be set lower resulting in a healthier balance sheet and lowered financing cost
  4. Company's visibility will improve with the coverage from analysts and media that can add to the credence and image of the SME leading to benchmarking its fair value
  5. The listing would result in an increased participation by venture capital players as they would have a ready, transparent and tax-efficient exit route.
  6. Listing would add value to the companies who wish to make use of ESOPs and other stock base compensation plans as a tool to reward and retain their employees. It is expected to encourage innovation and entrepreneurial spirit, much required from the perspective of Indian national economy.
  7. Capital Market allows distribution of risk efficiently by transferring risk to those who are best able to bear it.
  8. SME sector will grow better on two pillars of Financial system, i.e., Banking for debt capital and Capital Market for equity capital.

Benefits of SME Listing

Going public provides SMEs with equity financing opportunities to grow their business from operations to expansion to inorganic acquisitions. Access to equity financing lowers the debt burden leading to lower financing costs and healthier balance sheets.

Key Benefits :

  • Funding Convenience
  1. Access to capital and financing opportunities :
    Going public provides SMEs with equity financing opportunities to grow their business from operations to expansion to inorganic acquisitions. Access to equity financing lowers the debt burden leading to lower financing costs and healthier balance sheets. The continuing requirement for adhering to stock market rules for the issuers lowers the ongoing information and monitoring costs for the banks.

  2. M&A currency :
    Listed shares act as a currency, esp. for inorganic business acquisition transactions. Listed shares can be utilized as an acquisition currency, as an alternative to cash consideration, to acquire existing businesses / assets. Using shares as a currency can be a tax efficient and cost effective vehicle to finance an acquisition transaction.

  3. Premium Valuation :
    Valuation of a company is determined by various factors, one of which is class of company – listed or closely-held. The value discounting by investors of an unlisted entity can be avoided, if the shares are listed on a nation-wide exchange platform including SME Exchange.

  4. Efficient Risk Distribution for Investors :
    It is expected that the development of capital markets helps distribute risk efficiently by transfer of risk to those best able to bear it. Capital is a precious resource. When one can afford, he can invest it; when one needs it back, he can exit. This in-built mechanism of risk-transfer, in turn, lends to sustainability to market forces. Thus capital markets for SMEs are also expected to ensure that capital flows to its best uses and even the riskier activities with higher payoffs could be funded.

  5. Entry & Exit Platforms for PE / Other Investors :
    The presence of a market-driven transparent trading platform provides with a ready and easy entry and exit for strategic investors. Listing not only offers the investors flexibility for entry and exit, but also the confidence required for any such transaction.

  • Tax Benefits

Income- tax Act offers immense benefits to companies if their shares are listed on recognized stock exchanges including SME Exchange. Tax benefits, often, turns out to be one of prominent factors for listing :


  1. No Long-term Capital Gains Tax
    Transfer of unlisted shares attracts long term capital gains tax of 20% and short term capital gains of up to 30% (depending upon an assessee's income slab and applicable tax rate). Whereas in case of listed shares, tax on long term capital gains is nil and short term capital gains is 15%, provided the transaction has been subjected to securities transaction tax (STT). This preferential tax treatment on transfer of listed shares is also available to shares listed on SME Exchange. Listing on SME Exchange is a valid tax-planning tool and could, thus, lead to enormous tax saving for SME entrepreneurs / investors.

  2. No tax on fresh equity infusion in the company
    Recently the Finance Act, 2012 imposed a tax liability on fresh issuance of equity shares by an unlisted company to investors other than "Registered Venture Fund", if the issuance is made at a value more than the fair value. This could make SMEs subject to heavy tax outgo, since they often go for fund raising through equity issuance to investors. Such a tax liability, however, does not attract if the shares of the company are listed on recognize stock exchanges, including SME Exchange.

  3. No tax on distressed business purchase
    Income-tax Act levies a tax inter alia on the buyer of shares of an unlisted company, if the transaction is conducted at a value less than its book value. Hence acquisition of distressed assets could attract heavy tax. Such a tax liability, however, does not attract if the shares of the company are listed on recognize stock exchanges, including SME Exchange.

  4. Efficient Risk Distribution for Investors :
    It is expected that the development of capital markets helps distribute risk efficiently by transfer of risk to those best able to bear it. Capital is a precious resource. When one can afford, he can invest it; when one needs it back, he can exit. This in-built mechanism of risk-transfer, in turn, lends to sustainability to market forces. Thus capital markets for SMEs are also expected to ensure that capital flows to its best uses and even the riskier activities with higher payoffs could be funded.

  5. Entry & Exit Platforms for PE / Other Investors :
    The presence of a market-driven transparent trading platform provides with a ready and easy entry and exit for strategic investors. Listing not only offers the investors flexibility for entry and exit, but also the confidence required for any such transaction.

  • Other Benefits

  1. Visibility – Profile Building
    Going for a public issue is most likely to enhance the company's visibility. Greater public awareness gained through media coverage, and research coverage by sector investment analysts provide the SMEs with greater visibility and help brand building which otherwise may remain a dream especially for SMEs.

  2. Unlocking / Benchmarking Value
    The fair value of an unlisted company may not be benchmarked appropriately, in absence of a market-driven mechanism. The companies listed on a stock exchange are traded and the market forces are expected to establish their fair value or near-fair value. This leads to unlocking or benchmarking of fair value of the SME businesses.

  3. Incentive Mechanism for Employees
    The employees of an SME can participate in the ownership and benefit from being a shareholder. This can serve to ensure stronger employee commitment to the company's performance and success. ESOPs and any other share-based compensation plan of listed company have an immediate and tangible value to employees. This, in turn, serves as a talent retention tool.

  4. Benefit for Companies in Supply Chain
    The companies in supply chain in the forward or backward integration may take strategic stake as part of growth & expansion. Also, companies in the same business line planning to expand the operations may take a stake in listed SMEs.

  5. Governance – Internal Systems
    Though the requirements for a company listed on SME Exchange are not as stringent as that for Main Board listed companies, nevertheless SME listing ensures that the company has drawn up the internal control systems and set up minimum required framework of corporate governance. This, in turn, lends sustainability to the business.


SEBI Norms for Listing

In order to lay down the policy for issue, listing and trading of securities to be issued by SMEs, necessary amendments have been made in the SEBI ICDR Regulations and consequent amendments have been made into various other regulations viz. :

In order to lay down the policy for issue, listing and trading of securities to be issued by SMEs, necessary amendments have been made in the SEBI ICDR Regulations and consequent amendments have been made into various other regulations viz. :


  1. SEBI (Merchant Bankers) Regulations 1992
  2. SEBI (Foreign Institutional Investors) Regulations, 1995
  3. SEBI (Venture Capital Funds) Regulations, 1996
  4. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations and
  5. SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992

SEBI has, from time to time, issued the circulars and guidelines for setting up of the exchange for SMEs. SEBI vide “ICDR Third Amendment Regulations” 2010 dated 13th April, 2010, inserted a new Chapter XB under the head “Issue of Specified Securities by Small and Medium Enterprises”. A further circular was also issued on 18th May, 2010 after taking into account the suggestions from market participants for the SME platform. The necessary provisions for listing of specified securities under the SME Platform vide the above regulations and circulars are enumerated in brief:


  1. The post issue face value capital should not exceed INR Twenty Five Crores (INR 25 Crore).
  2. The minimum application and trading lot size shall not be less than INR 1,00,000/-
  3. The existing members of stock exchanges (stock brokers) would be eligible to participate in SME Platform.
  4. The issues shall be 100% underwritten and merchant bankers shall underwrite 15% in their own account.

Besides, SEBI has compulsorily mandated market making for all scrips listed and traded on SME Platform. The obligations of market making are as follows :


  1. The merchant bankers to the issue will undertake market making through a stock broker who is registered as market maker with the SME Platform.
  2. The merchant bankers shall be responsible for market making for a minimum period of 3 years.
  3. The market makers are required to provide two way quotes for 75% of the time in a day. The same shall be monitored by the exchange.
  4. There will not be more than 5 market makers for a scrip.
  5. Market makers will compete with other market makers for better price discovery.
  6. The exchange shall prescribe the minimum spread between the bid and ask price.
  7. During the compulsory market making period, the promoter holding shall not be eligible for the offering to market makers.
  8. Market Maker shall be allowed to de-register by giving one month notice to the exchange.
  9. Trading system may be either order driven or quote driven.

The application and trading lot size is being kept at INR 1,00,000/- so as to curtail the exposure of retail investors. It has also been stated that the minimum depth shall be of one lakh rupees and at any point of time it cannot go below that amount. The investors holding with value less than INR 1,00,000/- shall be allowed to offer their holding to the market maker in one lot. However, in functionality the market lot will be subject to revival after a stipulated time.

Further, the provisions of SEBI ICDR Regulations apply to SME IPO as well, unless any particular provision is specifically exempted.

Eligibility Criteria

Besides, SEBI norms, the stock exchanges have also prescribed eligibility criteria for listing on their respective SME Exchange:

  • Eligibility Criteria for BSE SME

BSE SME Exchange stipulates the following eligibility criteria for an applicant desired of getting listed on BSE SME Exchange :


  1. Net Tangible assets of at least INR 1 crore as per the latest audited financial results.
  2. Net-worth (excluding revaluation reserves) of at least INR 1 crore as per the latest audited financial results.
  3. Track record of distributable profits (excluding extra-ordinary income) in terms of section 205 of Companies Act, 1956 for at least two years out of immediately preceding three financial years, with each financial year being a period of at least 12 months. Otherwise, the net-worth shall be at least INR 3 Crore.
  4. Other Requirements :

    1. The post-issue paid up capital of the company shall be at least INR 1 crore.
    2. The company shall mandatorily facilitate trading in DEMAT securities and enter into an agreement with both the depositories.
    3. The company shall mandatorily have a website.
    4. Certificate from the applicant company / promoting companies stating the following : -
      The Company has not been referred to the Board for Industrial and Financial Reconstruction (BIFR), although the Companies which are out of BIFR are allowed. - There is no winding up petition against the company that has been accepted by a court.

  5. In addition to the above requirements, a visit to the company's site will be undertaken by the Exchange before granting of approval to use the name of the exchange in the offer document.
  6. It shall also be desirable for the Company to file a compliance certificate by a Practicing Company Secretary as per the guidance note issued by the Institute of Company Secretaries of India as an additional eligibility criteria issued by BSE through its circular dated 26-11-2012.
  7. Promoters will mandatorily be required to attend an interview with the Listing Advisory Committee.
  8. Migration from BSE SME Exchange to the main Board of BSE :

  • Eligibility Criteria for NSE Emerge

NSE Emerge stipulates the following eligibility criteria for an applicant desired of getting listed on NSE Emerge platform :


  1. The post issue paid up capital of the company (face value) shall not be more than INR 25 crore.
  2. The company should have track record of at least 3 years.
  3. The company should have positive cash accruals (earnings before depreciation and tax) from operations for at least 2 financial years preceding the application and its net-worth should be positive.
  4. The applicant Company has not been referred to Board for Industrial and Financial Reconstruction (BIFR).
  5. No petition for winding up is admitted by a Court of competent jurisdiction against the applicant Company.
  6. No material regulatory or disciplinary action by a stock exchange or regulatory authority in the past three years against the applicant company.
  7. The following matters should be disclosed in the offer document :

    1. Any material regulatory or disciplinary action by a stock exchange or regulatory authority in the past one year in respect of promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) of the applicant company.
    2. Defaults in respect of payment of interest and/or principal to the debenture/bond/fixed deposit holders, banks, FIs by the applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) during the past three years. An auditor's certificate shall also be provided by the issuer to the exchange, in this regard.
    3. The applicant, promoters/promoting company(ies), group companies, companies promoted by the promoters/promoting company(ies) litigation record, the nature of litigation and status of litigation.
    4. In respect of the track record of the directors, the status of criminal cases filed or nature of the investigation being undertaken with regard to alleged commission of any offence by any of its directors and its effect on the business of the company, where all or any of the directors of issuer have or has been charge-sheeted with serious crimes like murder, rape, forgery, economic offences etc.

Modes of Listing

Like the Main Board IPO, an SME IPO can be made either through the fixed price method or book building method. There lies considerable difference between the two types of issues, the key differences are enumerated herein below :


  Issue Type

  Fixed Price Issues

  Book Built Issue

  Offer Price

  Price at which the securities are offered and would be allotted is made known in advance to the investors

  A maximum  of 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding.

  Demand

  Demand for the securities offered is known only after the closure of the issue

  Demand for the securities offered, and at various prices, is available on a real time basis on the stock exchanges website during the bidding period.

  Payment

  100 % advance payment is required to be made by the investors at the time of application.

  10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application.


  • Book Built Issue
  1. An issuer company desirous of getting listed on SME Exchange is allowed to freely price the issue. The basis of issue price is required to be disclosed in the offer document, whereby the issuer needs to disclose in detail about the qualitative and quantitative factors justifying the issue price. The Issuer can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the draft offer documents filed and actual price can be determined at a later date before filing of the final offer document with Exchange/ROCs.

  • Price Discovery through Book Building Process
  1. As defined in Regulation 2(1) of SEBI ICDR Regulations,"Book Building" means a process undertaken by which a demand for the securities proposed to be issued is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover the price for securities.

    The process is named so because it refers to collection of bids from investors, which is based on a price range. The issue price is fixed after the closing date of the bid.

    A company planning an IPO/FPO appoints a merchant bank as a book runner. A particular time frame is fixed as the bidding period. The book runner then builds an order book that collates bids from various investors. Potential investors are allowed to revise their bids at any time during the bidding period. At the end of bidding period the order book is closed and consequently the quantum of shares ordered and the respective prices offered are known. The determination of final price is based on demand at various prices.

    Corporate may raise capital in the primary market by way of initial public offer, right issue, or private placement. An Initial Public Offer (IPO) or Follow on Public offers (FPO) to aid price and demand discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected from investors at various prices, which are within the price band specified by the issuer. The process is directed towards both the institutional as well as the retail investors. The issue price is determined after the bid closure based on the demand generated in the process. .

  • Price Band
  1. The offer document may have a floor price at which or a price band within which the investors can bid. The spread between the floor and the cap of the price band cannot be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The company decides the price band in consultation with the merchant bankers, and typically after undertaking a pre-marketing exercise with leading QIBs.

    The price band can have a revision. SEBI requires that any revision in the price band has to be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. When the price band is revised, the bidding period has to be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

  • Floor Price
  1. Floor price is the minimum price at which bids can be made.

  • Cut-off Price
  1. In a book building issue, the issuer is required to indicate either the price band or a floor price in the red herring prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called "Cut off price". This is decided by the issuer and the lead manager to the issue after considering the book and investors' appetite for the stock. SEBI ICDR Regulations permit only retail individual investors to have an option of applying at cut off price as such.

  • Issue / Bidding Period
  1. Any public issue is required to be kept open for at least three working days but not more than ten working days including the days for which the issue is kept open in case of revision in price band. In case the price band in a public issue made through the book building process is revised, the bidding (issue) period disclosed in the red herring prospectus shall be extended for a minimum period of three working days, provided that the total bidding period shall not exceed ten working days. The public issue made by an infrastructure company, satisfying the requirements in Clause 2.4.1 (iii) of Chapter II may be kept open for a maximum period of 21 working days.

  • Final Issue Price
  1. The demand at various price levels within the price band is made available on the websites of the designated stock exchanges during the entire tenure of the issue and once the issue closes, the final price is determined by the issuer and made known to the investors.

  • Pure Auction as an Additional Book building Mechanism
  1. SEBI has decided to introduce an additional method of book building, to start with, for FPOs, in which the issuer would decide on a floor price and may mention the floor price in the red herring prospectus. If the floor price is not mentioned in the red herring prospectus, the issuer shall announce the floor price at least one working day before opening of the bid in all the newspapers in which the pre-issue advertisement was released.

    Qualified institutional buyers shall bid at any price above the floor price. The bidder who bids at the highest price shall be allotted the number of securities that he has bided for and then the bidder who has bided at the second highest price and so on, until all the specified securities on offer are exhausted. Allotment shall be done on price priority basis for qualified institutional buyers. Allotment to retail individual investors, non-institutional investors and employees of the issuer shall be made proportionately as illustrated in Schedule XI of SEBI ICDR Regulations. Where, however the number of specified securities bided for at a price is more than available quantity, then allotment shall be done on proportionate basis. Retail individual investors, non-institutional investors and employees shall be allotted specified securities at the floor price subject to provisions of Clause (d) of Regulation 29 of SEBI ICDR Regulations.

    The issuer may:-

    (a) Place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder;
    (b) Decide whether a bidder be allowed to revise the bid upwards or downwards in terms of price and/or quantity;
    (c) Decide whether a bidder be allowed single or multiple bids.

  • The Process
  1. The issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'.
  2. The issuer specifies the number of securities to be issued and the price band for the bids.
  3. The issuer also appoints syndicate members with whom orders are to be placed by the investors.
  4. The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction.
  5. The book normally remains open for a period of 5 days.
  6. Bids have to be entered within the specified price band.
  7. Bids can be revised by the bidder before the book closes.
  8. On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels.
  9. The book runners and the issuer decide the final price at which the securities shall be issued.
  10. Generally, the number of shares is fixed, the issue size gets frozen based on the final price per share.
  11. Allocation of securities is made to the successful bidders. The rest get refund orders.

  • Guidelines for Book Building
  1. Rules governing the Book Building Process are covered in Chapter XI of the SEBI ICDR Regulations

  • Book Building System for BSE
  1. BSE offers a book building platform through the Book building software that runs on the BSE Private Networks.
  2. This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 trader work stations via leased lines, VSATs and Campus LANS.
  3. The software is operated by book runners of the issue and by the syndicate members, for electronically placing the bids on line real-time for the entire bidding period.
  4. In order to provide transparency, the system provides visual graphs displaying price vs quantity on the BSE website as well as all BSE terminals.

  • Book Building System for NSE
  1. NSE too has set up a nation-wide network for trading whereby members can trade remotely from their offices located all over the country. The NSE trading network spans various cities and towns across India.

    NSE decided to offer this infrastructure for conducting online IPOs through the Book Building process. NSE operates a fully automated screen based bidding system called NEAT IPO that enables trading members to enter bids directly from their offices through a sophisticated telecommunication network.

    Book Building through the NSE system offers several advantages:
    1. The NSE system offers a nation-wide bidding facility in securities
    2. It provides a fair, efficient & transparent method for collecting bids using latest electronic trading systems

    Costs involved in the issue are far less than those in a normal IPO

    The IPO market timings are from 10.00 a.m. to 5.00 p.m. On the last day of the IPO, the session timings can be further extended on specific request by the Book Running Lead Manager.

Current Article
SME IPO/ Stock Exchange Listing

SME Overview :

Small and Medium Enterprises (SMEs) are the backbone of a nation's economy. Like any other major economy, India too enjoys its fair share of SMEs which constitute bulk of the industrial base, also contributing significantly to the exports and GDP.

SME segment has been a key engine of growth, employment, wealth distribution and effective mobilization of resources (both capital and skills) in India. Statistically, SME segment contributes to 45% of the manufactured output, 40% of exports, and is among the largest generator of employment in the Indian economy. Today, Indian SMEs operate in sectors ranging from traditional to the most modern industries competing with the bests-of-the-world. SMEs in new economy sectors like IT, ITES, retailing, education, entertainment, media and the like represent the new and modern face of India. SMEs take a prominent role in social sectors as well and are known for bringing innovative business models.

With the advent of planned economy in 1951, special role was earmarked for SMEs, which was given a fillip by the subsequent progressive industrial policies. The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 provided for facilitating the promotion and development and enhancing the competitiveness of MSMEs (commonly referred to as SMEs) and for the related matters. A big leap for SMEs was witnessed in 2010, with "The Prime Minister's Task Force" recommending setting up of dedicated stock exchange/ platform for SMEs. SEBI, through its circular dated May 18, 2010, laid down framework for setting up a stock exchange/ trading platform dedicated to SMEs.


SME Exchange :

An SME Exchange is a stock exchange dedicated for trading the shares / securities of SMEs who otherwise find it difficult to get listed on the Main Board. The concept originated from the difficulties faced by SMEs in gaining visibility and attracting sufficient trading volumes when listed along with other stocks on the Main Board of stock exchanges. World over, dedicated SME trading platforms or exchanges are prevalent, which are known by different names such as 'Alternate Investment markets' or 'growth enterprises market', 'SME Board' etc. Some of the known markets for SMEs are AIM (Alternate Investment Market) in UK, TSX Ventures in Canada, GEM (Growth Enterprise Market) in Hong Kong, MOTHERS (Market of the high-growth and emerging stocks) in Japan, Catalist in Singapore and the latest initiative in China - Chinext. As a matter of fact, NASDAQ also started as an SME exchange.

In India, "SME Exchange" is defined in Chapter XB of the Securities and Exchange Board of India (Issue Of Capital And Disclosure Requirements) Regulations as a trading platform of a recognized stock exchange or a dedicated exchange permitted by SEBI to list the securities issued in accordance with Chapter XA of SEBI (ICDR) Regulations and this excludes the Main Board (which is in turn is defined as a recognized stock exchange having nationwide trading terminals, other than SME exchange).

To be listed on the SME Exchange, the post-issue paid up capital of the company should not exceed INR 25 Crore. This means that the SME Exchange is not limited to the Small and Medium Scale enterprises which are defined under "The Micro, Small and Medium Enterprises Development Act, 2006" as enterprises where the investment in plant and machinery does not exceed INR 10 Crore. As of now, to get listed on the Main Board of National Stock Exchange (NSE), the minimum paid up capital required is INR 10 Crore and that of Bombay Stock Exchange (BSE) is INR 3 Crore. Hence, those companies with paid up capital between INR 10 Crore to INR 25 Crore has the option of migrating from SME Exchange to the Main Board or vice versa. The companies listed on the SME exchange are allowed to migrate to the Main Board as and when they meet the listing requirements of the Main Board and there shall be compulsory migration of SMEs from the SME exchange, in case their post issue paid up capital exceeds INR 25 Crore.

BSE, as an Exchange, is the first-one to seize the initiative followed by NSE, both of them have come up with their SME Exchanges to leverage their respective trading platforms developed over the period.