How to List on NSE EMERGE - SME Exchange

National Stock Exchange's EMERGE platform is a SME stock exchange that allows startups and SMEs to list with or without an initial public offering (IPO). The NSE EMERGE platform connects growing businesses to a pool of sophisticated investors and help startups and SME raising equity funding. In this article, we look at the procedure for listing on the NSE EMERGE - SME Stock Exchange.

Benefits of Listing on the NSE EMERGE

Listing on the NSE EMERGE exchange has various benefits for startups and SME, other than raising of funds:

Provides the company with lots of visibility and credibility amongst investors, customer, suppliers, employees and other stakeholders.
Can help attract newer investors into the company.
The company can raise money by diluting smaller stake to informed investors on need basis
Can enable to the company to list on the NSE or other exchanges in the future.
Provides credibility and value to the ESOP offered to employees

Listing Requirements on the NSE EMERGE Platform

An issuer, whose post issue face value capital is upto twenty five crore rupees is eligible to get its securities listed on the SME platform.

Further, to be eligible to list on the NSE EMERGE platform, the entity must first satisfy one of the following conditions:

An entity which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value addition and at least twenty five per cent of its pre-issue capital is held by qualified institutional buyer(s) as on the date of filing of draft information document or draft offer document with the Board, as the case may be; OR
Any other entity in which at least fifty per cent of the pre-issue capital is held by qualified institutional buyers as on the date of filing of draft information document or draft offer document with the Board, as the case may be.

Hence, only companies that have Qualified Institutional Buyer(s) already subscribe to its shares are eligible to list on the NSE EMERGE exchange.

If the company satisfies one of the above condition, then the following additional conditions must also be satisfied:

The company, its promoter, group company or director does not appear in the willful defaulters list of Reserve Bank of India as maintained by Credit Information Bureau (India) Limited;
There is no winding up petition against the company that has been admitted by a competent court;
The company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction within a period of five years prior to the date of application for listing;
No regulatory action has been taken against the company, its promoter or director by SEBI, Reserve Bank of India, Insurance Regulatory and Development Authority or Ministry of Corporate Affairs within a period of five years prior to the date of application for listing;

NSE EMERGE - Listing Procedure

Appointment of Merchant Banker

The company must first select and appoint a Merchant Banker to act as Advisor for the listing of the company on the NSE EMERGE platform.

Preparing the Entity

To be eligible to list on the NSE, the company must first be incorporated (preferably as a

Limited Company). 1 must then be modified or must contain the following provisions:

There shall be no forfeiture of unclaimed dividends before the claim becomes barred by law;
Common form of transfer shall be used;
Fully paid shares shall be free from all lien and that in the case of partly paid shares the Issuer's lien shall be restricted to moneys called or payable at a fixed time in respect of such shares;
Registration of transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person or persons indebted to the Issuer on any account whatsoever;
Any amount paid up in advance of calls on any share may carry interest but shall not in respect thereof confer a right to dividend or to participate in profits;
Option or right to call of shares shall not be given to any person except with the sanction of the Issuer in general meetings;
Permission for Sub-Division/Consolidation of Share Certificate.

Filing Draft Prospectus

The Issuer must then file the draft prospectus and application forms with NSE Exchange. The draft prospectus should have been prepared in accordance with the statutes, notifications, circulars, guidelines, etc. governing preparation and issue of prospectus prevailing at the relevant time. The appointed Merchant Banker can help the company prepare the necessary documents at this stage.

Submitting Application

On completing of the draft prospectus, the issuer desiring to list new securities on the Exchange can make application for admission of their securities to dealings on the Exchange. The documents required at this stage would be:

Clauses of Articles of Association
Application Letter for Listing
Listing Application providing pre-issue details of securities
Listing Application providing post-issue details of securities
Checklist for supporting documents
Schedule of Distribution
Listing Agreement

Further Reading: Procedure for listing on the BSE SME Exchange

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Frequently Asked Questions

Common questions about Listing on NSE EMERGE SME Exchange: Benefits & Procedure.

Listing on the NSE EMERGE platform offers several benefits for startups and SMEs, including enhanced visibility and credibility among investors, customers, suppliers, and employees. It also provides an opportunity to raise equity funding by diluting smaller stakes to informed investors as needed and can enable future listing on the NSE or other major exchanges. Additionally, it adds value and credibility to the Employee Stock Ownership Plan (ESOP) offered to employees.

To be eligible for listing on the NSE EMERGE platform, the issuer's post-issue face value capital must not exceed Rs. 25 crore. Additionally, the entity must satisfy one of the following conditions: Either at least 25% of its pre-issue capital is held by Qualified Institutional Buyer(s) and the entity is intensive in technology, IT, IP, data analytics, biotechnology, or nanotechnology, or at least 50% of its pre-issue capital is held by Qualified Institutional Buyer(s).

Besides meeting the eligibility criteria, companies must also ensure that they, their promoters, group companies, or directors do not appear on the RBI's willful defaulters list. There should be no winding-up petition admitted against the company, and it should not have been referred to the BIFR within the last five years. Furthermore, no regulatory action should have been taken against the company, its promoter, or directors by SEBI, RBI, IRDAI, or the Ministry of Corporate Affairs in the past five years.

The first step in the listing process on NSE EMERGE is to appoint a Merchant Banker to act as an advisor for the listing process. The Merchant Banker will guide the company through the subsequent steps, including preparing the necessary documents and filings.

The company's Articles of Association must be modified or must contain provisions related to forfeiture of unclaimed dividends, common form of transfer, lien on shares, registration of transfer, advance payment of calls, option or right to call of shares, and permission for sub-division or consolidation of share certificates.

The Merchant Banker appointed by the company plays a crucial role in the listing process on NSE EMERGE. They assist in preparing the draft prospectus and other necessary documents, ensuring compliance with relevant regulations and guidelines. The Merchant Banker also guides the company through the application and filing process with the NSE Exchange.

Some of the key documents required for filing the listing application on NSE EMERGE include the draft prospectus, application forms, clauses of the Articles of Association, application letter for listing, listing application providing pre-issue and post-issue details of securities, checklist for supporting documents, schedule of distribution, and the listing agreement.

The article does not provide specific information on whether a company already listed on another exchange can migrate to the NSE EMERGE platform. However, it mentions that listing on NSE EMERGE can enable the company to list on the NSE or other exchanges in the future, suggesting that a separate process may be involved for companies already listed elsewhere.

According to the article, the NSE EMERGE platform is primarily designed for startups and SMEs. While there are no explicit restrictions mentioned, the eligibility criteria related to the post-issue face value capital and the requirement for Qualified Institutional Buyer(s) holding a significant portion of pre-issue capital may make it more suitable for specific types of companies, such as those in technology, IT, IP, data analytics, biotechnology, or nanotechnology sectors.

While the article focuses on the benefits and procedures for listing on NSE EMERGE, it does not explicitly mention any potential drawbacks or limitations. However, some potential considerations could include the smaller pool of investors compared to the main NSE exchange, additional compliance requirements, and the potential for limited liquidity or trading volumes, especially for smaller companies or those in niche sectors.