The National Stock Exchange (NSE) SME Exchange provides small and medium-sized enterprises (SMEs) with an opportunity to list their shares and raise capital from the public. While listing on the NSE SME Exchange can offer several benefits, there are specific timelines and requirements that SME companies must adhere to. In this article, we will guide you through the delisting process on the NSE SME Exchange and help you understand the key requirements for SME companies looking to get listed and eventually delist.
What is the NSE SME Exchange?
The NSE SME Exchange is a dedicated platform operated by the National Stock Exchange of India (NSE) for small and medium-sized enterprises. It provides a regulated and transparent marketplace for SMEs to raise capital through public offerings and offer their shares to investors. SMEs looking to access the capital markets without meeting the stringent requirements of the mainboard exchange can list on the SME exchange, which offers more relaxed listing norms.
The NSE SME Exchange caters to the financing needs of SMEs, promotes entrepreneurship, and encourages a wider investor base to participate in the growth of these companies. SMEs from various sectors, including manufacturing, services, and technology, can get listed on the SME exchange.
Benefits of Listing on the NSE SME Exchange
Listing on the NSE SME Exchange offers several advantages for SME companies:
Access to Capital: Listing on the SME exchange allows SMEs to raise capital by issuing shares to the public, providing funds for expansion and growth.
Enhanced Visibility: Being listed on a recognized stock exchange enhances the company’s visibility and credibility among investors, customers, and business partners.
Liquidity for Promoters and Investors: Listing provides an exit opportunity for promoters and early-stage investors who can sell their shares on the exchange, enhancing liquidity.
Brand Recognition: A listed status boosts the company’s brand image and facilitates access to new customers and business opportunities.
Compliance and Corporate Governance: SMEs need to adhere to certain disclosure and corporate governance norms, which can lead to improved business practices and investor confidence.
Valuation Benchmark: A listed status establishes a transparent valuation benchmark for the company, which can be beneficial during future fundraising rounds or mergers and acquisitions.
Timeline for Delisting from NSE SME Exchange
While listing on the NSE SME Exchange can be beneficial for SMEs, there might be instances where a company decides to delist from the exchange. Delisting refers to the process of removing the company’s shares from the stock exchange, making them no longer available for trading in the public market.
The delisting timeline for SME companies on the NSE SME Exchange typically involves the following steps:
1. Board Approval
The first step towards delisting is the board approval. The company’s board of directors must pass a resolution recommending the delisting of shares from the NSE SME Exchange. This resolution should be passed through a board meeting and should be duly recorded in the minutes.
2. Intimation to NSE
After obtaining board approval, the company needs to inform the NSE about its decision to delist. The company must provide all relevant information and documents related to the delisting process to the exchange.
3. Public Announcement
Upon receiving the company’s intimation, the NSE will make a public announcement about the delisting. This announcement will provide information to the shareholders and other stakeholders about the company’s decision to delist from the exchange.
4. Reverse Book Building
The delisting process involves a mechanism called “reverse book building,” wherein the company offers to buy back shares from the public shareholders. The company sets a delisting price, which is the price at which it intends to buy back shares from the public shareholders. The shareholders have the option to tender their shares at the delisting price or hold onto their shares.
5. Tendering of Shares
During the reverse book building process, shareholders who wish to participate in the delisting have to tender their shares at the delisting price. The company will then determine the total number of shares tendered by shareholders at the delisting price.
6. Acceptance of Delisting Price
For a successful delisting, the company needs to receive a minimum number of shares tendered at the delisting price. If the company receives the required number of shares, it will accept the delisting price, and the delisting process will proceed accordingly.
7. Exit Option for Shareholders
If the delisting process is successful, the company will provide an exit option to the remaining public shareholders who did not tender their shares during the reverse book building process. The company will buy back the remaining shares at the delisting price, providing an exit opportunity to the shareholders.
8. Delisting from NSE SME Exchange
After completing the reverse book building process and providing an exit option to the shareholders, the company’s shares will be delisted from the NSE SME Exchange. The company will then become an unlisted company, and its shares will no longer be available for trading on the stock exchange.
Requirements for Delisting from NSE SME Exchange
Delisting from the NSE SME Exchange requires compliance with certain regulatory requirements. SME companies must fulfill the following criteria to initiate the delisting process:
1. Board Resolution
The board of directors of the SME company must pass a resolution recommending the delisting of shares from the NSE SME Exchange. This resolution should be passed during a board meeting, and the decision should be recorded in the minutes.
2. Shareholder Approval
The decision to delist from the NSE SME Exchange must be approved by the shareholders of the company. An extraordinary general meeting (EGM) needs to be convened to seek the approval of the shareholders for the delisting proposal. The company must obtain the requisite majority of votes in favor of the delisting resolution.
3. Reverse Book Building
As part of the delisting process, the company needs to conduct a reverse book building exercise. During this process, the company will offer to buy back shares from the public shareholders at a specified delisting price. The delisting price is determined based on factors such as the company’s financial performance, market conditions, and other relevant factors.
4. SEBI Regulations
The delisting process must comply with the regulations laid down by the Securities and Exchange Board of India (SEBI). The company must ensure that all the requirements and guidelines issued by SEBI in relation to delisting are followed diligently.
5. Fair Price Determination
The delisting price offered to the public shareholders must be determined through a fair and transparent process. The company must appoint a merchant banker or a registered stockbroker as a “book runner” to manage the reverse book building process and determine the delisting price.
Conclusion
The NSE SME Exchange provides a viable platform for SMEs to raise capital and expand their businesses. While listing on the SME exchange offers several benefits, SME companies may consider delisting for various reasons. The delisting process involves specific timelines and requirements that SMEs must adhere to in order to successfully delist from the NSE SME Exchange.
Delisting from the exchange requires careful planning, compliance with regulatory norms, and adherence to SEBI guidelines. Companies need to ensure transparency in the delisting process and provide shareholders with a fair exit opportunity.
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By Astrobulls Research Pvt Ltd.