SEBI Relaxes Share Listing Rules for SMEs

According to the recent relaxation of listing rules by SEBI, Indian SMEs (Small and Medium Enterprises) can disclose their financial results every six months to the Securities and Exchange Board of India (SEBI).

There is no need to send full annual report to their stakeholders by the company which is listed in the SME exchange. And also SMEs need not publish their financial results in the main stock exchange. The companies can send a statement containing the salient features of all the documents to their stakeholders.

But the companies are needed to maintain a public shareholding of at least 25% of the total number of issued shares at all times, which means that the promoters share cannot exceed 75%. The company listed on stock exchange having post issue capital between Rs.10 crore and Rs. 25 crore and meets the requirements of the stock exchange can migrate to the main exchange. So the company should first make a proposal to list the specified securities and obtain the prior approval of its shareholders.

According to the SEBI, the issue shall be 100% underwritten and 15% should be underwritten by merchant banker in their own account. And to subscribe to the unsubscribed portion of the issue, the merchant banker can also enter into an agreement with nominated investors. For trading on SME platform, there is no need to seek fresh registration for a stock broker and sub broker where he/she is affiliated to stock broker who is eligible to take on SME platform. Earlier SEBI used to give time to the entities to comply with the regulations, but it has decided to give approvals to only corporatised and demutualised entities for operating as an SME exchange.

It is important to have nationwide trading terminals besides having a balance sheet net worth of Rs. 100 crore. And an online screen based trading system is also necessary. Online surveillance capability which monitors positions, prices and volumes in real time to be updated with market manipulation is also must for an exchange. The risk management system and surveillance system should be similar to the cash market segment which is being used currently.

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