In a development that is expected to make migration from small and medium enterprise platform to the mainframe more difficult, the National Stock Exchange has introduced several measures that will be implemented from May 1.
According to its latest circular, the new eligibility criteria for migration requires the paid-up equity capital of such companies should not be less than Rs 10 crore and the average market capitalisation should be at least Rs 100 crore. In addition, it has also mandated that companies should be listed on its SME platform for at least 3 years; the number of public shareholders at least 500 on the date of application; while promoter and promoter group holding is required to be at least 20% at the time of making application to shift.
In addition, the circular also said that on the application date, promoter’s holding should not be less than 50% of shares held by them on the date of listing. For the migration, the revenue is required to be more than Rs 100 crore in the previous financial year and the company should have positive operating profit from operations for at least 2 out 3 financial years.
Further, it has also introduced certain other regulatory conditions also apply for the migration like ensuring no proceedings have been admitted under Insolvency and Bankruptcy Code, no winding up petition admitted by NCLT/IBC, and no material regulatory action by the exchanges in the past 3 years, and no debarment of company or regulated entities by Sebi.
The tightening of guidelines for already-listed SMEs comes at a time, when the Securities and Exchange Board of India has already tightened the guidelines for companies going for initial public offers (IPOs).
Last month, the market regulator notified that SMEs planning to launch an IPO must have minimum operating profits of Rs 1 crore in at least two of the last three financial years. The offer-for-sale component was also capped at 20% of the total issue size, and selling shareholders was barred from selling more than more than 50% of their existing shareholding in the offering.
The new rules were implemented amid a sharp rise in SME IPO activity over the past two years. In 2024, 240 SMEs raised over Rs 8,500 crore, almost double of around Rs 4,500 crore raised in 2023.
When contacted, a BSE spokesperson said that effective January 01, 2024, BSE had revised certain eligibility criteria regarding migration, including requirements for net worth, minimum listing period, number of public shareholders, market capitalisation, positive EBIDTA and PAT etc.
“These norms are reviewed periodically and strengthening of the same shall be taken up at the appropriate time,” the spokesperson added.
A November 2023 circular by BSE effective January 1, 2024 had required the companies applying for migration to have a paid-up capital of more than Rs 10 crore and market cap of Rs 25 crores, and promoter holding at 20%,and net worth of at least Rs 15 crores for two preceding full financial years, along with three years listing period on the SME platform. “The applicant company shall have a minimum of 250 public shareholders as per the latest shareholding pattern,” the circular had said.