NIRC News July 2011.pmd - Icsi

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Article Q: Whether BSE is proposing any Index for the SMEs? A: In order to provide the insight on the performance of the SME companies, BSE will launch the SME index in the near future, once the critical mass of the companies is listed on the BSE SME Exchange. Q: Whether the BSE is considering any relaxation of Listing Fees for the SMEs? A: BSE has been always forthcoming and considerate in matters related to the SMEs. We have more than 1500 companies listed on the main board whose paid up capital is less than Rs. 10 crores. More than 2500 companies listed on the main board have the paid up capital between Rs. 10 crores and Rs. 25 crores. Altogether, more than 4000 companies (constituting about 83%) listed on the main board qualify to be listed on the BSE SME Exchange. Keeping up with the tradition and commitment for nurturing the SME companies, we have kept the Listing and other fees related to the primary markets for SMEs about 50% compared to the Listing and other fees on the main board. Q: What is the spread prescribed for the market maker on the SME Exchange? A: BSE has prescribed the slab wise spread for the scrips depending upon their price. A minimum spread of 5% is prescribed, which shall facilitate the market making and make it easier for the members empanelled. Q: What are the penalties for the market making violations? A: All the market makers for scrip together shall do market making more than 75% of the market timings. In case the market makers for scrip fail to comply these provisions up to 15 days, BSE has prescribed the monetary penalties. Beyond 15 days, the scrip will be temporarily suspended. Q: Whether the insider trading regulations apply to the SME Exchange? A: Insider Trading Regulations will be applicable to the SME Exchange also. However, the merchant banker to the issue can be on the board of the SME Company. Q: Whether Takeover code will be applicable? A: Takeover code will not be applicable in case of the Market Maker buy or sell of the shares for Market Making activity. However, the takeover code will apply for the investors. Q: Whether the investors are protected under the IPF on the SME Exchange? A: IPF (Investor Protection Fund) has been extended to the SME Exchange also. The investors in the secondary market are covered under this. The provisions of the IPF for the main board apply to the SME Exchange also. Q: Whether there is any floor price for the scrips listed on the SME Exchange? A: There will not be any floor price for the scrips on the first day of the listing on the SME Exchange. However, the circuit filter will apply from the next day. The circuit filters on the main board also apply for the SME Exchange and they can have check from the next day. Q: Whether companies listed on RSEs allowed for direct listing on the SME Exchange? A: Direct Listing of companies listed in RSEs is not permitted as of now. Q: Whether the suspended companies will be allowed to list on the SME Exchange? A: The companies are suspended on the main board for the non-compliance of the listing agreement. Once the compliance is done, the companies are allowed to list on the main board of the exchange as per the present norms. These companies have the choice to get them transferred, after taking the approval of 2/3rd of the non-promoter investors. Q: What is the clearing and settlement mechanism in the SME Exchange? A: The settlement will be T+2. There will be common collateral for the equity and cash segments. The Settlement Guarantee Fund of the equity covers the SME segment also. The existing clearing and settlement of the equity (cash) segment will be extended to the SME segment also. Q: What are the corporate governance norms for the SME Exchange? A: Clause 49 of the listing agreement and corporate governance will be applicable for the SME segment. There will be 50% independent Directors and remaining 50% will be promoter Directors. Q: How is the Risk Management done in the SME Exchange? A: The Risk Management will be applicable the same way as that of the main board. 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. Q: What is the Grievance Redressal system in the SME Exchange? A: 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. There is also a complaint cell for redressal of grievances of the investors against the companies. The Grievance Redressal System of the equity (cash) segment will be made available for the SME Exchange also. Q: What problems are faced by SMEs as well as BSE to launch the SME exchange? A: The working of SME Exchange is not well understood in the country. The SMEs are mostly not well informed of the capital market issues and modalities of raising equity capital. There is need for conducting lot of awareness programs to educate them. Merchant Bankers used to handle only the primary market issues so far. On the SME platform, he has to assist the company in the secondary market through market making for three years. Merchant banker, issuer and market maker have to work as team for three years to make the market making activity a success. This is a July, 2011 8 NIRC-ICSI Newsletter
Article huge challenge. The investor base is limited and only the investors with a minimum investment of Rs. One lakh are allowed to participate. We have interacted with the market intermediaries over the last six months. There were apprehensions of the SME model in the beginning. After few rounds of discussions, we see the substantial change in the perception of the SME platform. Many merchant bankers are optimistic and the members with market making experience are positive about the SME Platform. We are hopeful that the hurdles will not be a roadblock for the successful take off of the BSE SME Platform. Q: How equipped is BSE to launch the new SME exchange? A: The BSE is leveraging the existing equity platform for the BSE SME. The systems necessary for monitoring the market making and quote driven systems for the market makers are made to comply with SEBI Regulations. BSE is fully equipped to launch the BSE SME platform. Q: How is an SME exchange going to help smaller firms? A: There have been a traditional ways of funding available to the SME Companies. A dedicated exchange for these SMEs will help them in finding a solution to their financial requirements and crunching expansion plans. Listing of a company on the exchange gives better valuation to the company. The debt and equity ratios will improve and the balance sheet will look much healthier. 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. The repose of faith by the investors – domestic and foreigners in the listed SMEs is high. Transparency and corporate governance will improve manifold by listing on SME Platform. Listed company will have easy accessibility to alternate funding options. The banks, P/E funds and other financial institutions provide them the loans very easily. The fund raising through ADRs and GDRs become easier. Also, the company can raise more funds through follow on public offering. The tax benefits are also immense. The long term capital gain tax on listed company is zero. Q: What is the outlook of the Market participants about the SME Exchange / Platform? A: A large number of merchant bankers are optimistic about the SME Exchange/ Platform. 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 who have medium to long term perspective are optimistic on huge 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. The professionals like and Company Secretaries have an important role to play in educating the promoters of the SMEs and guiding them in raising equity capital on SME Platform. The member brokers and the sub brokers having branches and franchises spread across the country can play important role in mobilising and educating the SMEs with their market knowledge and experience. Q: How do you see the future of SME exchange in India? A: The SMEs are the backbone of the Indian economy. The SMEs in India produce about 45% of the manufacturing output and contribute about 40% of the country’s exports. They are the largest employment provider in the country. SMEs are craving for the better funding sources all along. The BSE SME is going to bring the entire pool of investors on a single platform and hence it will be easier for the SMEs to raise the capital through this platform in a cost effective manner. The need and the requirement of the SME exchange for the SMEs to raise the equity capital are there for very long. The SMEs have responded positively in a big way and coming forth for the listing. There is a good future for the SME Exchange, considering the huge demand and requirement of capital for the growth of SMEs. Q: How do you propose to reach out to the SMEs across India? A: First of all, we had detailed discussions with the market intermediaries, like the Merchant Bankers, Member Brokers etc to brief them on BSE SME Platform and also took their feedback. Second, we have been conducting the Seminars for educating the SMEs on the benefits of listing and the preparations required for listing on the BSE SME Platform. We have already conducted the Seminars in Maharastra, Gujarat, Andhra Pradesh, New Delhi, Kolkatta etc and lined up large number of Seminars to cover other parts of the country. Third, 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 etc, so that the professionals can play important role in educating the promoters and management of SMEs. Q: By when do you expect to start the SME exchange? A: BSE SME already received the ‘in Principle’ approval from the SEBI. We are waiting for the final approval of the SEBI. We intend to create awareness about the BSE SME Platform among the SMEs and various market intermediaries, before going live. We are likely to be operational by September, 2011. July, 2011 9 NIRC-ICSI Newsletter
Page 1 and 2: July, 2011 1 NIRC-ICSI Newsletter
Page 3 and 4: From the Chairman Dear Professional
Page 5 and 6: Article RAISING OF EQUITY AND LISTI
Page 7: Article • Effective communication
Page 11 and 12: COMPLIANCE CHECKLIST FROM 10 TH JUL
Page 13 and 14: PROFESSIONAL DEVELOPMENT & TRAINING
Page 15 and 16: Students 6-14.6.2011 20 th Student
Page 17 and 18: PUBLIC RELATIONS COMMITTEE Sl. No.
Page 19 and 20: Delhi Study Group Meetings DELHI ST
Page 21 and 22: Forthcoming Programs TWO DAY WORKSH
Page 23 and 24: July, 2011 23 NIRC-ICSI Newsletter

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