SME LISTING - A PRIMER1 Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company Sarthi Capital Advisors Private Limited Bridging the Gaps Privileged & Confidential SME LISTING -

1Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company

Sarthi Capital Advisors Private LimitedBridging the Gaps

Privileged & Confidential

SME LISTING - A PRIMER


AGENDA

• SME Listing - Background• SME Listing - An Overview of Key Requirements &

Eligibility Norms

• Key Benefits of SME Listing

• SME Listing - Coming up in a BIG Way…

• Sarthi – Partner in Process

• Annexures


SME Listing - Background

BSE and NSE launched

their respective

platform for SMEs; MCX

too is gearing up

for SME Exchange

The move aims at

providing an opportunity

to SME entrepre-neurs to

raise growth capital and

reap benefits of listed

space

Both BSE & NSE leverage their existing

‘equity platform’ for

SME exchange platform

As per estimate of

SME Chamber of India, over 5000 SMEs

have the potential for

listing

A facilitative framework

for SME listing


SME Listing – Evolution…

5-Nov-08

•SEBI lays down broad framework for SME listing platform

Jan-10

•PM Task Force recomm-ends SME listing exchange

26-Apr-10

•SEBI circular on Guidelines for market making

17-May-10

•SEBI Circular rolling out model listing agreement for SMEs

18-May-10

•Amend-ments in SEBI Regulations (ICDR, Merchant Bankers etc.

31-Dec-10

•SEBI Master Circular on SME exchange & Market Making

27-Sep-11

•SEBI approval to BSE SME Exchange

5-Oct-11

•Amend-mends in Listing Agreement

14-Oct-11•SEBI

approval to NSE SME Exchange

21-Feb-12•SEBI

circular standardizing lot size for SME exchange

13-Mar-12•BSE SME

Exchange launch

19-Apr-12•BSE

Eligibility Norms for SME listing


SME Listing - An Overview of Key Requirements & Eligibility Norms


SME Listing - Key Requirements & Eligibility Norms

Post Issue Face Value Capital Listing PlatformUp to 10 crores SME Exchange10 crores to 25 crores SME/ Main

BoardMore than 25 Crores Main Board

Capital threshold for listing :

Minimum application amount / trading lot of Rs. 1 lac 100% underwriting (MB to underwrite 15% in own account) MB to undertake market making through Exchange-registered market makers for minimum 3 years

Public Shareholding Min. 25% Min. 50 investors required; No post-listing continuous requirement

Provisions for migration to / from Main Board from / to SME Exchange

SEBINSE

BSE

Offer Doc not

subject to SEBI vetting

Refer Annexure

for key norms of SEBI ICDR



Post Issue Capital (FV)

• Max : Rs.25 crore• Min : Rs. 1 crore

Track record

• Net Tangible Assets : Rs. 1 crore (as per latest audited results) • Net Worth (excl. Rev. Reserve) : Rs. 1 crore or 3 crore, if no track record• Track record of distributable profits for at least 2 years out of preceding 3 completed

FYs

Other requirements

• Mandatory facilitation of trading in Demat securities• Certificate that no winding petition or reference to BIFR• Mandatory corporate website• Promoters to attend to interview with Listing Advisory Committee

BSENSE

SEBI

Refer Annexure

for key norms of

LA



Post Issue Capital (FV)

• Same as BSE

Track record

• Track record of at least 3 years • Positive cash accruals (EBDT) from operations and positive net worth for at least 2

FYs preceding the application • In case the above conditions are not fulfilled, Exchange Authority (MD & Joint MD) to

decide

Other requirements

• Same as BSE• Additional certification / disclosures on litigation etc.

NSEBSE

SEBI


SME Exchange v. Main Board – Advantage SME

Parameters Main Board SME Exchange (BSE)Post – issue paid up capital Min Rs. 10 crore Min Rs.1 crore; Max Rs.25 crore

Minimum Allotees in IPO 1000 50

IPO underwriting Non Mandatory(Under 50% compulsory subscription to QIB’s)

Mandatory(100% underwritten with MBunderwriting 15%)

IPO Grading Mandatory Not mandatory

Track record Stringent track record norms Relaxed track record norms

Offer Document vetting By SEBI By Exchange

IPO Application Size Rs. 5000 – Rs. 7000 Min. Rs. 1 lac

IPO Time frame 6 months 2 – 3 Months

Reporting Requirements Quarterly Half yearly


Benefits of SME Listing


Key Benefits of ListingFu

ndin

g Co

nven

ienc

e Access to capital & financing opportunitiesAvoid unlisted space discountingM&A CurrencyEntry / Exit platform for PE / other investor

Tax

Bene

fits No Long Term Capital

GainsShort Term Capital Gain Tax at reduced rate of 15%No tax on equity infusion in the companyNo tax on ‘distress business’ purchase

Oth

ers Unlocking value

ESOPs – Talent retention toolVisibility – Profile buildingGovernance - Internal systems


Facilitated Relaxed Listed Platform…

With the relaxed IPO conditions and quicker processes with reduced compliance costs, listing for SMALL companies is poised to become a BIG platform soon…

Reduced Compliances & Costs

Relaxed & quicker listing process

All benefits of listed space


SME Listing – Coming up in a BIG way…


SME - Coming up in a BIG Way…

So far, 11 companies have been listed on BSE SME Exchange & 2 on NSE Emerge Exchange –

Particulars BCB Finance

Monarch Health

MaxAlert

Systems

Sangam Advisors

Jupiter Info

media

VetoSwitch gears

Bronze Infra

A. Valuation / Market Cap

(Rs. Crore)

Pre Issue Net Worth 11.5 0.8 7.1 4.4 2.0 32.7 17.4

Issue Size 8.8 7.2 8.0 5.1 4.1 25.0 8.6

Market Capitalization* 31.1 49.8 84.6 13.5 8.5 83.6 26.7

B. Price Pattern (Rs per share)

Issue Price 25.0 40.0 20.0 22.0 20.0 50 15

CMP (Face Value Rs. 10)* 27.0 83.0 92.0 22.0 24.25 50.15 15.45

*Closing Prices As on, 3rd January, 2013


Particulars JointecaEducation

SRG Housing

ThejoEngineering

Comfort Commotrade

AnshuClothing

RCL Limited

A. Valuation / Market Cap (Rs. Crore)

Pre Issue Net Worth 9.6 4.9 25.8 4.3 12.7 5.6

Issue Size 5.4 7.0 19.0 6.0 5.1 5.8

Market Capitalization* 15.8 17.4 64.4 16.0 18.7 12.2

B. Price Pattern (Rs per share)

Issue Price 15.0 20.0 402.0 10.0 27.0 10.0

CMP (Face Value Rs. 10)* 15.8 21.5 375.0 16.0 30.0 9.90

*Closing Prices As on, 3rd January, 2013

Companies in the process of listing -

Sunstar Reality Development Ltd

Subh Tex (India) Limited

VKC Credit and Forex Services Limited

SME - Coming up in a BIG Way…


SME Listing – An Opportunity to Capitalize

The relaxation in the requirements ofSME exchange encourages SMEs to getlisted thereby providing the opportunityto raise equity capital for growth andexpansion.

It will help the company to attain its objective and have transparent valuation throughefficient price discovery. In turn this will create wealth for stakeholders with considerablecapital gain tax benefits and the facility of entry as well as exit at any point.

A company with sustainable business model which clearly defines its purpose anddemonstrating its value proposition should certainly explore this opportunity to enhanceits profile and competencies.


Sarthi - Partner in Process


Sarthi – Partner in Process

Pre-IPO Capital Restructuring and Preparation

Offer Document Preparation

Offer Management

Listing Assistance

End-to-end assistance

and hand-holding

by expert &

dedicated team SARTHI…


SME Listing – Way Forward…

Appointment of Sarthi Capital

Advisors - Merchant Banker

Restructuring of capital

Due Diligence & Pre-IPO preparation

Preparation of Offer Document

Marketing Strategy

Appointment of other intermediaries

Filing of Offer Document with BSE

& Others

Issue Pricing & Allocation

Listing & Market Making

20

HAPPY TO HELP….

SARTHI CAPITAL ADVISORS PRIVATE LIMITEDBridging the Gap

Corporate Headquarters:Mumbai159/11, Amar Brass Compound, Vidhya Nagari Marg,Kalina, Santacruz(E), Mumbai-400098Landline: (022) 26528671-72, Fax: (022) 26528673

Regional Office:New DelhiAnthem House, E-360, 1st Floor,Nirman Vihar, New Delhi-110092Landline: (011) 26449815-17-18, Fax: (011) 26438916

DisclaimerAll data and information is provided for informational purposes only and is not intended for any factual use. It should not beconsidered as an offer of sale of services mentioned in this information memorandum. Neither Sarthi Advisors nor any of itsgroup company, directors, or employs shall be liable for any of the data or content provided for any actions taken in reliancethereon.


AnnexuresSarthi’s End-to-end Services


Phase- I: Pre-IPO Capital Restructuring & Preparation

Under the phase, Sarthi shall assist you in preparing for IPO and listing on SME Exchange.The services under this phase shall include the following : Assistance in devising appropriate capital restructuring plan;

Assistance in statutory compliance management and setting up minimum corporate governance practices expected by alisted company from the perspective of the following rules / regulations : Companies Act, 1956

Listing Agreement applicable for SMEs

BSE listing norms

SEBI ICDR Regulations;

Assistance in appointment of market intermediaries and other parties including the following; Underwriters

Market Makers

Registrars to Issue

Bankers to Issue

PR Agency, Printer etc.;

Assistance in devising a complete IPO plan and strategy including the likely post-issue shareholding distribution pattern.


Phase- II: Documentation Preparation

Sarthi shall assist you in drafting of IPO Offer Document and other importantagreements, documents and resolutions necessary for an SME IPO process. An indicativelist of important documents is as under for easy understanding : IPO Offer Document, Tripartite Agreement with NSDL, CDSL and Registrar to Issue, Underwriting Agreement, Market Making Agreement, Agreement with Bankers to Issue, Agreement with Registrar to Issue, Board / Shareholders’ Resolutions, Certificates, Letters of Representations etc, Draft of public advertisements, notices etc, Forms / Applications to be filed with BSE, ROC and other regulatory office.


Phase- III: Offer Management

Once all pre-IPO preparations would be over including meeting the eligibility criteria,appointment of other market intermediaries, and drafting of offer document, Sarthiinitiates the actual process of IPO. The services under the phase shall include end-to-endIPO activities : Filing of IPO Offer Document with BSE and other regulatory offices like SEBI and ROC; Follow-up with BSE and ROC for their approvals; Execution of agreements with other market intermediaries; Assistance in launch of IPO and coordinate with other parties including PR Agency, Printers for adequate

public advertisement, distribution of application forms as required statutorily; Monitoring the flow of applications and keeping a real-time discussion with the management of the

Company; Coordinating with bankers and registrars for deposit of application moneys and finalization of allotment

list in consultation with the stock exchange .


Phase- IV: Listing Assistance

Finally, post IPO closure and finalization of allotment, Sarthi initiates the activities forlisting of equity shares of the Company on BSE SME Exchange. The scope of services underthis phase shall include the following: Assistance in completing allotment of shares to the successful allotees, Preparing listing application , Filing of listing application with BSE, Coordinating and assistance in interview with BSE Listing Advisory Committee, Follow-up with BSE and obtain listing approval, Assist in trading formalities and obtain BSE’s trading approval, Assist in making required public disclosures as required statutorily, Coordinating for continuous market making for 3 years.


AnnexuresSome Key Norms of Listing Agreement & SEBI ICDR


SME Listing Agreement

All SMEs getting listed need to enter into Listing Agreement (LA) with the relevant stockexchange.

BSE and NSE has adopted model LA released by SEBI.Key Requirements include the following : Half-yearly results (Audit / limited review) Half-yearly shareholding pattern Advance notice of Board meetings with specified agenda (e.g. dividend, bonus, buy back etc.) In-principle approval for any further issuance of shares Disclosure of price sensitive information Annual report containing inter alia full financials, consolidated financials, related party

disclosures etc. to be uploaded on corporate website Full annual report to be emailed; Abridged annual report to shareholders not on email ids Compulsory migration to main board after the cut- off ceiling


SEBI ICDR As Applicable to SMEs

SEBI ICDR applies to SME listing with specific relaxations Offer document requirements and eligibility norms relaxed

Appointment of Merchant Banker, and other intermediaries required Lead Merchant Banker to the issue, Rights , obligations, and responsibilities relating to disclosures, allotment, refund, and

underwriting obligations Book building or fixed priced issue permitted Lock-in conditions apply 20% of post-issue capital to be locked in for 3 years; balance promoter shareholding to be

locked in for 1 year Non-promoter pre-IPO shareholding to be locked in for 1 year with exception to ESOP shares

and shares held by VCF or FVCIs for more than 1 year pre IPO Locked-in shares permitted to be transferred inter se promoters incl. new promoter(s)

Documents

SME LISTING - A PRIMER1 Sarthi Capital Advisors Pvt. Ltd. - A Sarthi Group Company Sarthi Capital Advisors Private Limited Bridging the Gaps Privileged & Confidential SME LISTING -