How does a company transition from SME Exchange to Main Board of NSE/BSE?

How Does a Company Transition from SME Exchange to Main Board of NSE/BSE?

Many small and medium-sized enterprises (SMEs) begin their journey on the SME exchanges of NSE or BSE before they transition to the main board. The transition from the SME exchange to the main board signifies the growth and maturity of a company and can significantly enhance its visibility and access to capital. Let’s explore the process of how a company can transition from the SME Exchange to the Main Board of NSE/BSE.

1. Eligibility Criteria

The first step in transitioning from the SME exchange to the main board is ensuring that the company meets the eligibility criteria set by the stock exchanges. For NSE/BSE main board listing, a company must have a minimum paid-up capital, meet profitability criteria, and have a history of operations. Typically, companies should have at least three years of operational history and demonstrate financial stability and profitability.

2. Board Approval and Shareholder Resolution

The company’s board of directors must first approve the transition proposal. After that, the company needs to seek approval from its shareholders via a special resolution. This is typically done through an extraordinary general meeting (EGM) where shareholders vote on the decision to move to the main board.

3. Filing the Application with Stock Exchanges

Once the board and shareholders approve the transition, the company must file an application with the respective stock exchanges (NSE/BSE) for the main board listing. The company needs to submit detailed documentation, including financial statements, a copy of the resolution, and other compliance-related documents as per the exchange's guidelines.

4. Appointment of Merchant Banker

The company is required to appoint a merchant banker to facilitate the transition. The merchant banker plays a crucial role in preparing the company for the main board listing by conducting due diligence, drafting the offer document, and helping the company comply with all regulatory requirements.

5. Filing of Draft Prospectus

The company, with the help of the merchant banker, will need to file a draft prospectus with SEBI for approval. The draft prospectus outlines the company's financials, business operations, and the details of the offering. Once SEBI approves the draft prospectus, the company can proceed with the final listing application.

6. Complying with Regulatory Requirements

The company must comply with all the regulatory requirements outlined by the stock exchanges and SEBI. This includes adhering to corporate governance norms, submitting necessary financial statements, and meeting listing criteria such as minimum net worth and liquidity requirements. The company must also ensure that it is fully compliant with the regulations governing public offerings and securities issuance.

7. Final Listing on the Main Board

Once all the approvals are in place, the company is formally listed on the main board of NSE/BSE. This move opens up greater capital-raising opportunities for the company, as it now has access to a larger pool of institutional and retail investors. The company will now be subject to the regulations applicable to main board-listed companies, including more stringent reporting and governance requirements.

8. Conclusion

Transitioning from an SME exchange to the main board of NSE/BSE is a significant milestone for a company. It not only enhances the company's profile but also increases its access to capital and investor interest. By fulfilling the necessary regulatory requirements and obtaining shareholder approval, companies can successfully make the shift and enjoy the benefits of being listed on the main board.