Exclusively listed companies (ELCs) of regional stock exchanges are learnt to have approached the Securities and Exchange Board of India (Sebi) to intervene in relaxing the eligibility norms for listing on the BSE and the National Stock Exchange (NSE).
Sources said close to 1,100 companies with a combined market capital of around Rs 4,500 crore are wanting to migrate to the BSE and the NSE from now-defunct regional stock exchanges. However, these entities are unable to do so due to high entry requirements of the stock exchanges. These companies have a paid-up capital in the range of Rs 2 crore to Rs 4 crore each.
Apart from the Sebi Lisiting Obligations and Disclosures Regulations (LODR), each stock exchange has its own eligibility norms which a company needs to meet if it has to list on that particular exchange. As per data available on the NSE website, a company needs to have a paid-up equity capital of at least Rs 5 crore and net worth of Rs 10 crore to be listed on it.
“Sebi cannot force these companies to de-list because they witnessed good volumes while they were listed on the regional stock exchanges and they also have a good track record in terms of compliance. However, the only reason why they are unable to migrate is due to the entry requirements,” said a broker who is a part of the secondary markets advisory committee of Sebi.
Market participants said if the regulator doesn’t intervene, the companies would either be forced to de-list or will have to increase their paid-up capital. “If the company falls short of the criteria by 10% to 20% they can go for a rights issue or QIP and increase their paid-up capital to qualify for listing on the NSE or BSE. However, if their paid-up capital is less than Rs 3 crore, the process is not feasible,” a domestic broker said.
ELCs are the firms which are listed only on regional stock exchanges. Speaking to select media on Wednesday, UK Sinha, chairman of Sebi, said there were close to 3,000 ELCs in India, of which 511 have opted to get listed on main bourses.
In May 2012, Sebi had issued a circular asking all the 16 regional stock exchanges to either generate a turnover of more than Rs 1,000 crore on a consistent basis or seek exit through voluntary surrender of recognition. Sebi had given the exchanges a two-year window to comply or exit.
Reducing the number of listed companies is a part of Sebi’s agenda for 2016-17. The regulator had outlined the same during the board meet in March 2016. In recent interaction with media, Sinha said Sebi would ask companies that have been suspended from trading for seven years to de-list from the exchanges by giving an exit option to investors.