BSE SME serves as the exchange on the Bombay Stock Exchange (BSE) specifically designed for Small and Medium Enterprises (SMEs). SME companies borrow funds from the general public and then get registered on BSE through selling shares in their company. SME stocks SME stocks are listed through the same platform as regular corporations.

SME IPOs give investors to invest early in companies that are on the beginning of their growth. SME-listed companies will eventually be moved onto the major exchange when they have grown.

Here you can Read the Criteria for a New Listing on the BSE SME Exchange

The incorporation process: The company will be formed by the Companies Act, of 1956.

Eligibility Criteria:
Post Issue Paid Up Capital Post Issue Paid up Capital Not more than 25 crores. 25 crores

Net Worth: At at least. 1 crore in the preceding two complete financial years.

Notification: In cases in which a firm is created through the conversion of a registered Proprietorship or partnership/LLP, the partnership firm/LLP has to be able to show a Net Worth of the equivalent of Rs. 1 crore over the previous two (full) year financials.

Net tangible Asset Rs 3 crores during the preceding (full) budget year.

track record:The history of an company that is applying for listing must be at least three years. If the applicant has purchased the proprietorship concern/registered partnership firmor LLP then the track record of the proprietorship concern/ registered companyor LLP should be at a minimum of three years old.

If so, the company is requesting listing, it must be able to demonstrate operations for at minimum one full year, and have the audited financial results of one full year of financial results.

Or

If the company applying for IPO has no track record of three years and more, then the Project that the IPO is proposed must be inspected and financed with the help of NABARD, SIDBI, Banks (other than cooperative banks) and Financial Institutions.

If so, the company that is seeking to be listed must be able to demonstrate operations for at minimum one full year, and have verified financial results for a entire financial year.

Earnings before interest, depreciation, and taxes:The company/ proprietorship concern/registered firm/LLP must have operating profits (earnings before depreciation, interest as well as tax) from its operations for two of the three most recent financial years prior to the date of application.

If the company has operating profits (earnings before depreciation, interest and tax) from its operations for a complete financial year before the date of application.

Companies seeking to list where their project was evaluated and financed through NABARD, SIDBI, Banks (other than co-operative banks) as well as Financial Institutions, it shall be operating profit positive (earnings before depreciation, interest and tax) from its operations during one complete financial year prior to the one preceding.

Leverage RatioLeverage ratio that is not more than 3:1. The relaxation may be granted to companies in finance.

Discipline:No regulatory action of suspension of trading is taken against any promoter(s) or the company who are promoted by their promoters any stock Exchange that has a nationwide trading terminal.

Promoter(s) or directors are not Promoter(s) and directors will never be promoter(s) and director(s) (other other than directors who are independent) of companies that are delisted according to the Exchange and also the potential consequences of delisting that is compulsory is attracted, or for those companies suspended from trading because of non-compliance.

The director must not be barred or disqualified by any Regulatory Authority.

default:No pending defaults in the payment of principal or interest to the bondor fixed deposit holders by the company that is applying for it or promoters/promoting company (ies) or subsidiary Companies.

Change of name:In case of a name change during the previous year at least 50percent of revenues calculated on a consolidated and restated basis for the previous one full year of financial reporting was derived through the business that is reflected under its new name.

The name suggested by the activity must have contributed at minimum 50% of the revenue, based using a consolidated and restated basis for the prior whole year.

Additional Criteria for Broking Companies Applying for SME IPO

Profit and Net WorthNet worth of at least Rs. 5 crores and profits before tax of at minimum Rs. 5 crores over 2 out of three financial years.

Or

Net worth of at minimum at least. 25 crores within any three years of five financial years.

The financial year should last comprised of 12 months. Extraordinary income cannot be taken into account when calculating profits.

Nettangible AssetsThe Nettangible Assets that are at minimum the amount of Rs. 3 Crores, as per the most recent audited financial results.

Post-issued Paid-up capitalPost payment-up capital for the member who is a broker must be at a minimum of Rs. 3 crores.

Additional Criteria for Micro Finance Companies

Microfinance firms as well as the standard criteria applicable to all SME companies, should possess an Asset Under Management of Rs. 100 Crores and a customer base of 10000 or more and is not allowed to hold deposits from the public.

Additional Requirements (for all businesses):
•    It is a must for every company to have a website that is functional.
•    100 percent of the shareholding of the Promoter in the Company must be in the form of dematerialisation.
•    It is a requirement for companies to facilitate trading in demat securities as well as sign agreements with the two banks.
•    There shouldn't be a changes in any of the directors or promoters in the business during the preceding year prior to the date of application to BSE to list in the SME segment.
•    The board's composition must conform to the provisions in the Companies Act, 2013 at the time of approval in principle.
•    The computation of net worth will be based on the definition by the SEBI (ICDR) Regulaments
•    The Company is not reported to NCLT in accordance with IBC.
•    There isn't any winding-up petition filed against the company, which was accepted to the courts.

Notification: Cooling off period minimum six months from the date of rejection or withdrawal of the issue by SEBI/Exchanges.