Professional Documents
Culture Documents
Shubham Patodia
Student!!!!
Introduction
NATURE Characteristics
Needs Objectives
Scope Classifications
INTRODUCTION
Features MSME
Thats How it is ;)
Features: SME !
Size of Business
Capital
Valuation
Qualitative Factors
Owner is 1 or more !
Volume
Turnover
Employment
(<100)
Exclusive Features!
Small and medium enterprise accounts about 45% of manufacturing output, 40% of total export of the country It gives employment about 59 million person. It have higher growth rate than the rest of industrial sector. There are over 6000 products : traditional to high tech items.
Features
About 54% of sales revenue is generated from this industry 40% of GDP is covered by MSEs 26.1 million are there in the country About 7.3 million of these are manufacturing and 18.8 is service enterprise. About 2.1 million (13.72%) is managed by women. Rural is about 14.2 million
Natures Of SME
Natures : SME !
Flexibility
Personalized manner
Labour intensive
Indigenous Resource
Easily Managed
Decentralization
Entrepreneurial Spirit
Voluntary registration
Unorganized labour
Employment Bars
BOOSTERS
Open Sources Government Organizations MSME Investors Crowd Sourcings
Majors
ExportOriented Unit
ExportOriented Unit
Retailing
Service Industries
Construction
Manufacturing Enterprise
Service Enterprise
Classification Manufacturing Enterprises* Service Enterprises** Micro Rs. 2.5 million/ Rs. 25 lakh (US$ 50,000)
Family Enterprise
Feeder Enterprise
WHY MSME?
Do we need them?
YES!!!! WE DO !
Generate employment
NEEDS
Tapping of saving
Poverty alleviation
Higher productivity
Contribution to decentralization
Export contribution
Growth Is Success
Growth .
Contribution to manufacturing output and exports Employment Higher growth rate Varied products
Self employment
Some of the key constraints that are being faced by the Indian MSMEs are: a. Accessing adequate and timely financing on competitive terms, particularly longer tenure loans. b. Accessing credit on easy terms has become difficult in the backdrop of current global financial crisis and the resultant liquidity constraints in the Indian financial sector, which has held back the growth of SMEs and impeded overall growth and development. c. The financing constraints faced by Indian SMEs are attributable to a combination of factors that include policy, legal/regulatory framework (in terms of recovery, bankruptcy and contract enforcement), institutional weaknesses (absence of good credit appraisal and risk management/ monitoring tools), and lack of reliable credit information on SMEs. d. It has become difficult for lenders to be able to assess risk premiums properly, creating differences in the perceived versus real risk profiles of SMEs. e. Access to skilled manpower, R&D facilities and marketing channels is limited. f. Availability of finance at cheaper rates, skills about decision-making and good management and accounting practices, and access to modern technology. Bribery and corruption emanates from red-tapism and high-handedness of the bureaucracy.
Introduction
11
14
18
27
Key Players
35
38
37
Beneficial Aspects
42
49
39
A.
Introduction
Vision
Provide the world class platform for the SMEs and Investors to come together and raise the equity capital.
stage. It will help unleash the valuation of the company and in the
process create wealth for all the stakeholders including investors, besides considerable long term capital gains tax benefits and facility to exit at any point of time
Introduction
Capital Market Regulator SEBI has given In Principle Approval to Bombay Stock Exchange (BSE) Ltd. to launch the BSE SME Exchange/Platform . BSE is leveraging the existing Equity platform i.e. BOLT System for launching the BSE SME Exchange. Negligible cost in launching the platform.
All Merchant Bankers empanelled with SEBI are by default MBs for this segment. Additional responsibility of secondary market for market making.
All Members registered with BSE are by default Members for this segment. No additional infrastructure required by Members for secondary market trading.
43
Introduction
SME companies with post issue paid up capital up to 25 crore can list on the BSE SME Exchange. 100% under writing by the Merchant bankers mean that the SME listing-cumIPO issue will be 100% success. Larger participation of investors exit option Liquidity in the secondary market Market Making
44
The SMEs with paid up capital up to Rs. 10 crores can come on the SME Exchange, in contrast to the paid up capital of Rs. 10 crores or more for the main board.
The Listing norms have been simplified. The issuer has to take the approval of the Exchange and SEBI approval is not required. A copy of the offer document will be sent to the SEBI for their information.
45
B.
48
49
C.
Incentives for greater venture capital participation by providing an exit option thus reducing their lock-in period
51
52
Nascent Stage
D.
100% underwritten issues and Merchant Banker/s shall underwrite 15% in their own account
The Merchant Banker to the issue will undertake market making through a stock broker who is registered as market maker with SME Exchange. The Merchant Banker shall be responsible for market making for a minimum period of 3 years
56
57
ICDR Guidelines chapter XA clearly specifies that it will attract all the provisions of main ICDR guidelines where the exemptions are not being provided under these provisions.
Clearing and Settlement Mechanism
The existing clearing and settlement of the equity (cash) segment will be extended to the SME segment also.
58
The provisions of the IPF for the main board apply to the SME Exchange also.
Takeover Code Regulations
Takeover code will not be applicable to the Market Maker. The buy or sell of the shares by the Market Maker for Market Making activity is exempted. However, the takeover code will apply for all the investors.
The sale of unlisted shares in short term attract the capital gain tax of 30% and the long term capital gain tax of 10%. The sale of listed securities in the short term attract the capital gain tax of 10% and there is no long term capital gains tax. This makes it clear that the listing of shares very attractive.
Risk Management System
The Risk Management will be applicable to the BSE SME Exchange the same way as that of the BSE main board. All the M-to-M (Mark to Mark) Margins, VAR Margins, ELM (Extreme Loss Margin) and special margins as applicable to the main board will also apply for the SME Exchange.
As per ICDR guidelines, the grading of IPOs is compulsory. The same applies to the companies to be listed on the BSE SME Exchange also.
Website for the SME Companies
The Regulator has made it mandatory for the companies to have websites, if they propose to be listed on the main board. The same applies to the SME companies, if they want to get listed on the BSE SME Exchange.
The Exchange has the IGRC (Investor Grievance Redressal Committee) to redress the complaints of the investors against the members. If amicable solution is not reached, the members can opt for arbitration. The Grievance Redressal System of the equity (cash) segment will be made available for the SME Exchange also.
Corporate Governance
Clause 49 of the listing agreement and corporate governance will be applicable for the SME Exchanges also. There has to be 50% independent Directors and the remaining 50% will be promoter Directors.
62
E.
64
Market Makers
Only the Members of the stock exchanges recognized by the SEBI can act as Market Makers. The members desirous of becoming market maker have to get themselves registered as market maker with the BSE SME Exchange by filing the registration form. These members should have a minimum experience of 3 years, minimum net worth of Rs. 5 crore and a daily turn over of Rs. 10 crore. The market maker shall have additional net worth of Rs. 2 crore for additional scrip.
65
The market makers can also buy from or sell to the nominated investors the required shares for market making. The merchant banker and nominated investor need to enter into an agreement in this regard. The nominated investors can be QIBs and PE Firms who are registered with the respective Regulator.
66
The spread prescribed varies from 5% to 10% depending on share price. A minimum spread of 5% is prescribed, which shall facilitate the market making and make it easier for the members empanelled.
67
Odd lots may get created because of the corporate action taken by the company from time to time, like issuing bonus shares, warrants and rights issues. According to the SEBI guidelines, the odd lots can be sold only to market makers and the investor has to give the declaration that he is selling all the odd lot shares of the particular scrip to the market maker.
All the market makers for scrip put together shall do market making for more than 75% of the market timing. In case the market makers for scrip fail to comply with these provisions, BSE has prescribed the monetary penalties.
69
F.
Key Players
Key Players
Venture Capital Funds P/E funds Angel Investors HNIs Financial Institutions NBFCs QIBs Registrars Merchant Bankers Members and Market Makers Financial Advisors CSs, CAs, CFOs etc SME Companies
72
G.
74
Due Diligence on the various approvals required from regulatory bodies Due diligence on the applicability of various regulations Risk factors associated with the company External environment effecting the company Magnitude and listing out of litigations Business activity Past performance and financial results Material contracts and agreements Detailed report on promoters & management
75
Selection of investment banker Selection of registrar and transfer agent (RTA) Selection of syndicate member /sub- syndicate members Selection of electronic media and advertising agency Selection of Escrow Bankers Understanding of regulations pertaining to Stock Exchange, SEBI and the other regulatory bodies
76
H.
Beneficial Aspects
The listed SMEs will unlock their wealth in the medium to long term and will do the wealth creation for the promoters and the investors.
The listed SMEs will get better visibility among the investors. The investor base of the company improves for the listed companies in medium term.
79
80
We are hopeful that these challenges will not be a roadblock for the successful take off of the BSE SME Platform.
82
A large number of merchant bankers are optimistic about the SME Exchange/ Platform. Except top 5 MBs, most of the medium size MBs are keen and already started working.
The market makers will get the fees out of the issue expenses, like the merchant bankers. The members who have the experience of market making in the past are positive on the scope of market making in this segment.
Investors outlook is not yet clear. But the investors with medium to long term perspective are optimistic on wealth creation opportunity in this segment. Regarding the SMEs, the response has been extra ordinarily exciting. The SMEs are enthusiastic about the opportunity to raise the equity capital on BSE SME.
83
84
I.
Marketing Activities
Road Shows Jointly organizing seminars with the Chamber of Commerce' of different states for illustrating advantages of listing Training Programs Advisory Committee Segment Awareness Programs Reaching the potential SME companies through web portals and mails
87
We have been conducting the Seminars for educating the SMEs on the benefits of listing and preparations required for listing on the SME Platform. We have already conducted the Seminars in Maharashtra, Gujarat, Andhra Pradesh, New Delhi, Kolkata etc and lined up large number of Seminars to cover other parts of the country. We have detailed Marketing plan to reach out to the SMEs spread across the country. We are tying up with channel partners which include various institutes and associations engaged in the development of SMEs so as to create awareness among the SME companies about the benefits of listing at this platform. We are also educating the professionals through the platform of ICSI and ICAI , as the professionals can play important role in educating the promoters and management of SMEs.
88
Thanking You!
MSME Are Crucial Aspects Of an Economy Dont Let this Opportunity Get Missed Make it Big > Make It Happen Empower Yourself > Empower World
Thanking You ! Hope We Made Your Day worth it ! ;) Regards Signing Off :Shubam pattodia Mudit Dudhoria