The new framework for listing small and medium enterprises (SMEs), which would enable companies to be listed without the mandatory fund-raising, could be implemented in the next three to four months, said a senior Securities and Exchange Board of India (Sebi) official.
Sebi has formed an expert panel comprising stock exchange officials, legal and consultancy professionals and representatives from private equity and venture funds. The committee would review existing norms and suggest guidelines to allow companies to trade on the SME platform, without the prerequisite of an initial public offering (IPO).
The move follows a Budget proposal to allow small companies to be listed on the newly-set up SME platforms without conducting a public issue.
The Sebi official said the new framework would give better visibility to smaller companies and help venture capital funds and other early-stage investors to make exits.
A panel member, who didn't wish to be identified as the criteria for such listings were yet to be decided, said the guidelines to be put in place would be simple, as no fund-raising was involved. Series-A funding (initial funding by private equity or venture capital funds) was one of the eligibility criteria being considered, he added.
"The objective is to get wider participation of well-informed investors in SMEs, through such listing, and to enable easy exits for early-stage investors," he said.
Sebi is also planning to make it easier for issuers and other participants such as investment bankers to boost SME listings.
Since the inception of the SME platform about a year ago, nearly two dozen SMEs have been listed on BSE and the National Stock Exchange (NSE).
Sebi is considering relaxations to the obligatory underwriting and market-making for merchant bankers, along with lower dilution requirement for promoters. According to current norms, an issuer has to dilute at least 25 per cent equity through SME IPOs.
For SME IPOs, investment bankers are responsible for market-making for at least three years and the IPO has to be fully underwritten.
Members on the SME expert panel include NSE vice-president Hari K, BSE-SME Exchange's Ajay Thakur, Deloitte senior director Avinash Gupta, V K Agarwal from the Federation of Indian Micro, Small & Medium Enterprises and Indian Venture Capital and Private Equity Association president Mahendra Swarup.
The panel's first meeting was held at the Sebi office on April 9.SMALL BEGINNINGS
- Sebi sets up expert panel for SME listing
- Panel to form guidelines for listing of SME companies without fund raising
- Move follows Budget proposal
- Norms could be simpler as no fund raising involved
- Panel to also review existing SME rules to boost listing
- Obligation of market making, underwriting on i-bankers could be relaxed