You must have questioned as a small business owner why companies like yours want to come to the Capital Markets. The following are the primary reasons:
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- To infuse new funds into the company through an equity infusion.
- Mergers and acquisitions, as well as expansion, are all possible with equity funding.
- Increase your net worth and market value.
- It also improves your ability to leverage. The debt-to-equity ratio improves, and the ability to borrow money expands.
- Because you’re listed on the stock exchange, it boosts your reputation and visibility. It improves your financial situation, producing a boom in interest in the company’s stock.
- A structured market allows them to reach a larger audience of investors.
- Increases working capital and broaden the capital base.
- MSMEs can raise funds at a low cost and with less stringent rules and regulations. They are no longer reliant on banks for financing.
- A small business promoter normally has limited resources, and if that capital is depleted and he wants to expand the company, he must go to the Capital Market.
Important Considerations When Entering the MSME Exchange:
- A company that wants to be listed on the SME, should not have been referred to the Board for Industrial and Financial Reconstruction ( BIFR ). However, if it has come out of the ambit of BIFR, it is eligible.
- There must be no current petitions in court for the applicant corporation to be wound up.
- In the previous three years, there should have been no regulatory complaints or disciplinary action brought against the applicant firm or its directors by a stock exchange or regulatory authority.
- It must not have previously raised funds from the general public or made a public offer.
The above considerations demonstrate that a small business owner must be extremely cautious regarding his or her company’s eligibility if he or she wishes to be featured.
MSME Listing Requirements:
A small business must meet certain compliance standards in order to be listed:
- A Private Limited Company must be the SME.
- A full-time Company Secretary should be employed by the company ( Compliance Officer ).
- To comply with corporate governance standards, the board must include at least 50%, independent directors.
- It is necessary to have a website.
- The minimum application and share lot size should both be Rs 100,000. The price band determines the lot size. This is to ensure that only high-net-worth individuals and huge investors participate in small businesses.
- The issue shall be underwritten in its entirety, with at least 15% of the issue underwritten by the Merchant Banker or the Lead Manager personally.
How do you make the transition from the MSME Exchange to the Main Board?
SMEs can now migrate to the Main Board without having to do an Initial Public Offering, according to the BSE and NSE. To do so, a small business owner must meet the following requirements:
- If a company’s market capitalization on the SME crosses Rs 25 crores, it is required to migrate to the Main Board.
- This market capitalization is computed in the case of the BSE based on the average price of the stock over the previous 20 trading days from the date of filing of the application to the Board for migration.
- In addition, the applicant firm must ensure that its post-issue capital exceeds Rs 10 crore and that neither its promoters nor its directors are restricted from participating in the capital markets.
- For a minimum of two years, the company shall be listed and traded on the BSE SME platform.
- A special resolution will be used to seek shareholder support.
How Do Small Business Listings Benefit Investors?
- It allows investors to identify and invest in good companies at an early stage, while also providing a straightforward exit route.
- Long-term capital gains tax incentives are also available to investors.
- It lowers their hazards.
Many small business owners aspire to be listed on the stock markets, however, some do not meet the BSE and NSE’s eligibility requirements. However, if they follow the aforementioned guidelines and restrictions, there is no reason why they cannot profit from the stock market’s current optimistic trend. It will be a win-win situation for both small business owners and investors if they list on the exchanges.
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