EMERGE symbolises the aspirations of a large number of entrepreneurs participating in the India growth Story and having potential

to unlock value and emerge on a bigger stage.

SME PLATFORM Regulatory Framework

SME PLATFORM

SME Regulations : Issuers

Regulations
Issuer Post issue paid up capital

Expected Issuer profile

Capital requirement : Rs 20-200 crore. Traditional & new economy Cos Capital for growth and exit to early investors (VCs/ angel investors) VC assisted companies -next round of funding.

- Rs 10-25 crore : SME/ main Board

- < Rs 10 crore : SME Board only No cap on Market Cap/ Issue Size

3 year operational history and 2 year

positive cash accruals Post listing requirements Corporate governance norms same as main board half yearly audited accounts instead of quarterly on main board

Relatively early stage Cos could list

Subsidiaries of Large companies looking to unlock value. Project SPVs of large groups

SME Regulations : Investors

SME Regulations Expected Investor profile
Institutional Investors could invest and take

Min IPO application and trading lot : Rs 1 lakh

significant stakes in companies Nominated Investor will be attractive to VCs/ PEs and PIPE investors with medium to long term invest interest Investors could get VC kind of opportunities

HNIs, Institutional (FII/DII/ VC/PE/PIPE)/ QIB)

Nominated investors (NIs) can support underwriting and market making. SEBI VC regulations amended to enable NI role for VC firms

(alpha return opportunity) HNI investors could invest along with experienced risk investors Platform will provide higher liquidity (vis a vis private space) with daily liquidity windows

SME Regulations : Intermediaries

Merchant Banks
Brokers/ Market Makers
All exiting brokers of CM segment eligible to trade CM Brokers can act as market makers after registration with exchange Obligations of MMs - 2 way quote in each trading session - Min depth of quote : Rs 1 lakh - 75% presence in each trading session - quote within specified BO spread Market maker to have inventory equivalent to 5% of IPO size on the date of allotment. Market maker arrangements with NIs to be disclosed in DRHP Max 5 market makers in one scrip

Merchant Bankers Same as Main Board (SEBI registered) No separate class of merchant Banks

Obligations 100% u/writing (15% in own books) To Ensure 3 year market making Can tie up with Nominated Investors for underwriting and market making

IPO Process and Migration

IPO Process
Migration
Migration from main board to SME and SME to main board allowed. Listed companies with paid up capital between Rs 10 -25 crore may migrate from SME to main board and main board to SME , provided, a special resolution is passed with the support by 66% of non promoter shareholders. comply with the listing eligibility criterion of the respective platform. On increase of capital beyond Rs 25 crore, co can migrate to main board subject to fulfilling listing criterion of main board.

DRHP in same format Only exchange observations on prospectus No grading requirement min 50 allottees Min application size : Rs 1 lakh (can be higher) Hard underwriting of IPOs Nominated Investors could give commitment for subscription

Benefits of listing on SME platform

MAIN BOARD

SME PLATFORM

VC/ PRIVATE EQUITY

WHY LIST ?
Recognition & Visibility Clients, Vendors & community Long term Capital for growth Capital for innovation and research Improves leverage ESOPS to attract and retain Stock as currency for acquisitions

Exit & Liquidity for early stage Investors/ VCs Wealth creation for shareholders

WHY list on SME Platform

Easier to list. Lower Time & Cost. Structured IPOs. Focused selling 100% underwriting. Aggregates risk investors. Institutional Investors + HNI risk Investors. More informed investors

Alternate Valuation. Price preservation Repeated rounds of capital

Listing on main board after attaining serious size and with a more broad based offering

NSE SME Platform

Value proposition NSES PROPOSTION

Credible Admission Process

Merchant Bank Due diligence Merchant may Bank require Due Exchange additional diligence third party diligence

Exchange approval

In-

principle

Final approval
Submission of final prospectus with details of underwriting & market making arrangements Final approval accorded by exchange

Exchange will examine DRHP and conduct management discussion Provide observations/ seek clarifications In-principle approval

Transparent

Efficient

Credible
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Voluntary adoptions Going forward : Voluntary adoption of measures to inspire investor confidence:
IPO Grading
Though not mandatory, IPO grading will demonstrate transparency and add credibility to the issue

End use of Funds monitoring

A reporting agency (PCS or PCA) could be identified by issuer/ merchant banker to report the end use of the IPO proceeds to investors.
NSE will launch a tailor made certification module to ensure that the compliance officer/ CFO of the issuer is well versed with compliances and obligations of a listed company. Availability of the CEO for interaction with analysts and research agencies and for sharing information on the companys performance regularly.

CFO Certification

Post-listing Research reports

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SME : Exchange Trading system

Trading system options

SME securities will trade through existing NEAT trading system of NSE Risk management system o Existing clearing settlement mechanism of NSCCL o VAR margins applicable o Existing CM SGF collaterals could be used o Existing surveillance mechanism to b extended to SME scrips Trading lots in multiple of Rs 1 lakh Negotiated trades through block window Separate odd lot market

Continuous market

Call auction

Each SME scrip will trade in either continuous or auction market. Based on expected investor profile and liquidity levels, Merchant bank/ issuer can opt for any one system

NSE Hand holding support

Preparation & Handholding for issuers

Connect to Merchant Bankers

Marketing support for IPOs

Support analyst coverage post listing

SME PLATFORM
Stakeholders in the journey

SME PLATFORM

SME Stakeholders
Banks & Institutions
Emerging SME Companies Risk Investors ,including VC community SME Advisors Intermediaries
Merchant banks Market Makers

Media
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Thank You
NATIONAL STOCK EXCHANGE OF INDIA LIMITED Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai 400051, India Tel: + 91 22 26598100/ 66418100 Fax: + 91 22 26598120 Web Site: www.nseindia.com

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