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SME IPO Migration to Mainboard

Migration from the SME exchange to the mainboard is the process by which small and medium enterprises can start trading on the mainboard exchanges. Check SME to main board migration criteria and document checklist.
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Content:

  1. Benefits of migration from SME to mainboard
  2. Criteria for migration from SME to mainboard
  3. Procedure for migration from SME to mainboard
  4. Timeline for migration from SME to mainboard

The journey from being a Small and Medium Enterprise (SME) to becoming a mainboard-listed company is a significant milestone in the lifecycle of any business. It represents a company's growth, maturity, and ability to meet stricter regulatory, financial, and corporate governance standards.

This migration is not a simple procedural shift; it requires meticulous planning, strategic adjustments, and a fundamental transformation of the company's operational and governance framework. In this chapter we will explore the motivations, benefits, challenges, and step-by-step process involved in migrating from an SME board to the Mainboard of a stock exchange.

Benefits of migration from SME to mainboard

SME to mainboard migration offers various benefits to the SME company. These benefits motivate the SMEs to go for mainboard listing.

  • Enhanced Visibility and Credibility : Mainboard listing elevates the company's profile, attracting institutional investors, analysts, and media attention. This heightened visibility translates to increased credibility with customers, suppliers, and partners.
  • Reflects company's growth : It signals to investors, customers, and competitors that the company has reached a level of maturity and is ready to compete on a larger stage.
  • Access to Larger Capital Pools : The Mainboard offers access to a broader and deeper pool of capital, enabling the company to fund expansion plans, acquisitions , and research and development initiatives.
  • Improved Liquidity : Shares listed on the Mainboard are generally more liquid, facilitating easier trading and providing existing shareholders with a readily available exit option.
  • Attracting and Retaining Talent : Listing on the Mainboard enhances the company's reputation, making it more attractive to top talent.
  • Increased Shareholder Value : Successful migration can lead to an increase in the company's share price, benefiting existing shareholders.
  • Increased investor confidence : Adhering to mainboard listing requirements forces companies to adopt robust governance practices, which can improve operational efficiency and investor confidence.
  • Valuation Benefits : Companies listed on the Mainboard often enjoy better valuation multiples due to their perceived stability and compliance with higher regulatory standards.

Criteria for migration from SME to mainboard

The transition from an SME platform to the Mainboard is subject to stringent eligibility criteria set by the stock exchange and regulatory authorities . Each stock exchange has specific eligibility criteria for migration, but common requirements include:

  • Financial Performance : Companies must meet minimum revenue, profitability, and net worth thresholds.
  • Minimum Operating History : A proven track record of profitable operations over a specified period.
  • Minimum Paid-Up Capital : A substantial base of equity capital.
  • Shareholding Requirements : Sufficient public shareholding and free float as per Mainboard regulations.
  • Compliance with Corporate Governance Standards : Adherence to robust governance practices, including independent directors, audit committees, and transparent disclosure policies.
  • Compliance with Listing Rules : Adherence to the specific listing rules of the Mainboard, which are typically more stringent than those for SME platforms.

BSE SME migration to mainboard - Eligibility Criteria

Criteria

Requirement

Paid-up Capital

More than ₹10 Crores

Market Capitalization (Average) *

Minimum ₹100 Crores

Promoter Holding

Minimum 20% of equity share capital

Profitability

  • Average of ₹15 crores (on a restated consolidated basis) over the last 3 years (each of 12 months)
  • Minimum ₹10 crores EBITDA in each of the 3 years

If the company has changed its name within the last 1 year; at least 50% of revenue (on restated consolidated basis) in the previous full year must come from the business activity reflected in the new name.

Net Worth

Minimum ₹1 Crore in each of the preceding 3 years (restated & consolidated)

Listing Track Record

Listed on SME Exchange for at least 3 years

Regulatory Actions

  • No trading suspension in the last 12 months (other than procedural)
  • No SEBI debarment for company, promoters, or subsidiaries
  • No director disqualification by regulatory authorities
  • No admitted winding-up petition by National Company Law Tribunal (NCLT)
  • Not a wilful defaulter or fraudulent borrower
  • Promoters/directors not fugitive economic offenders

Public Shareholders

Minimum 1,000 public shareholders (latest shareholding pattern)

Insolvency and Bankruptcy Code (IBC) & Defaults

- No pending IBC cases

- No default in interest/principal payments ( debentures , bonds , fixed deposit s)

Utilization of Funds

Certification by a SEBI-registered credit rating agency for IPO or further fund utilization

Investor Complaints (SCORES ID)

No pending investor complaints

Cooling-off Period

  • 2 months if recently removed from trade-to-trade category or other surveillance actions
  • Not under surveillance measures (ESM, ASM, GSM, T2T)
Lock-in of Promoter/Group Shares

6 months from listing on BSE
Not applicable for SME migration to Main Board

Promoter Shareholding

100% in demat form

Market Liquidity Requirements

(New)

Share Trading Activity

  • At least 5% of the company’s listed shares must be traded during the last 6 months.

Active Trading Days

  • The company’s shares should have been traded on at least 80% of trading days in the last 6 months.

Turnover (Value of Shares Traded)

  • **Average daily turnover (last 6 months): Minimum ₹10 lakhs .
  • Minimum turnover on any day : At least ₹5 lakhs .

Number of Trades

  • **Average daily trades (last 6 months): At least 50 trades per day .
  • Minimum trades on any day : At least 25 trades .

Net Tangible Assets

  • Minimum ₹3 Crores in each of the last 3 years (restated & consolidated)
  • Not more than 50% held in monetary assets
  • If >50% in monetary assets → must be utilised/committed in business/project

Business Consistency

Same line of business for 3 years

*Calculation of average market capitalization = Aggregate of daily market capitalization on all trading days in the last 6 months /Total number of trading days during the same period.

** To calculate average, take the total turnover (or total trades) on all the days the stock was traded in the last 6 months, and divide it by the total number of trading days in that period.

Documents required for BSE SME migration

  • Board Resolution - Certified copy approving migration.
  • Shareholders' Approval - Notice & resolution from Annual General meeting (AGM)/Extraordinary General meeting (EGM).
  • Financial Reports - Annual reports for the last 3 years.
  • Profit & Net Worth Certificate - Proof of EBITDA ≥ ₹15 Cr (avg. over 3 years, min. ₹10 Cr each year) & Net Worth ≥ ₹1 Cr each year.
  • Market Capitalization Certificate - Proof of minimum ₹100 Cr market capitalization (6-month average for migration).
  • Credit Rating Agency Certificate - Fund utilization verification.
  • Corporate Governance Report - Compliance certificate.
  • Information Memorandum - Soft & hard copy signed by managing director/ company secretary .
  • SEBI SCORES Registration - Screenshot & confirmation email; no pending investor complaints.
  • PAN & DIN of Directors - PDF & Excel format
  • Scrutinizer's Report - Postal ballot voting results.
  • Undertakings - From MD/CS/Merchant Banker ensuring compliance with SEBI & BSE norms.
  • Fees Payment Proof - Processing, Initial, and Annual Listing Fees.
  • Net Tangible Assets Certificate – NTA ≥ ₹3 Cr each year, not >50% in monetary assets (or proof of utilization/commitment)
  • Liquidity Proofs – Evidence of compliance with new liquidity norms (5% shares traded, 80% trading days, avg. turnover & trades).
  • Public Shareholding Details – Proof of minimum 1,000 public shareholders (latest shareholding pattern)
  • Business Consistency Proof – Evidence of same line of business for at least 3 years (≥50% revenue from same activity if name change)

SME to mainboard migration NSE - Eligibility criteria

Criteria

Requirement

Paid-up Capital

Minimum ₹10 Crores

Market Capitalization*

Minimum ₹100 Crores

Profitability

- Positive EBITDA for at least 2 out of last 3 financial years.

- Positive PAT in the most recent financial year.

Listing Track Record

Listed on SME Exchange for at least 3 years

Net worth

At least ₹75 crores (as per SEBI guidelines).

Other Listing Conditions

- Company should not be under Board for Industrial and Financial Reconstruction (BIFR) or Insolvency & Bankruptcy Code proceedings.

- No winding-up petition admitted by NCLT.

- No SEBI debarment for company, promoters, or subsidiaries.

- No material regulatory action in the past 3 years.

- No pending investor complaint in SEBI SCORES.

Public Shareholders

Minimum 500 public shareholders on the date of application.

Additional Requirements

- Must disclose all litigations/regulatory actions.

- A 2-month cooling period if recently removed from surveillance actions.

- Must have a proper investor grievance redressal mechanism.

- PAN & DIN of Directors must be provided.

- Disclose change in control or fund utilization.

NSE's Right to Reject Applications

NSE can reject applications if:

- Criteria are not met.

- Application is incomplete.

- False or misleading information is provided.

- Any other reason as deemed fit by NSE.

Revenue from operations

Greater than ₹100 crores in the last financial year

Promoter and Promoter Group Holding

- Minimum 20% of equity share capital

- On the date of application, must hold at least 50% of the shares owned at the time the company was first listed

* Market capitalization to be calculated based on the average price over the last 3 months.

Documents required for NSE SME migration

  • Company Confirmations (Annexure I)
  • Company Details (Annexure II)
  • Statutory Auditor Certificate - Net worth confirmation
  • Certificate on Fund Utilization - From Company & Statutory Auditor
  • Board Resolution - Proposal for migration to Main Board
  • Secretarial Compliance Report Acknowledgement - From Practising Company Secretary (PCS)
  • XBRL Utility for Corporate Governance - Compliance with SEBI (LODR) Regulations 2015
  • Certified Postal Ballot Notice - For shareholder approval
  • Information Memorandum
  • Scrutinizer Report - Postal ballot voting results, including promoter/public vote count
  • Shareholder Resolution Copy - Approving migration through postal ballot
  • PCS Certificate - To confirm compliance with SEBI (LODR) Regulation.

For annexures and more details refer to NSE SME to mainboard checklist .

Procedure for migration from SME to mainboard

  1. Engage Advisors : Assemble a team of professionals, including investment banker s, legal advisor s, auditors , and consultant s, to guide you through the process.
  2. Assessment and Planning : Conducting a feasibility study to assess eligibility and readiness for Mainboard listing.
  3. Regulatory Approvals : Obtaining approvals from the stock exchange and regulatory authorities .
  4. Financial and Compliance Audit : Ensuring financial records, governance practices, and operational structures meet Mainboard requirements.
  5. Restructuring (if necessary) : Adjusting shareholding structures, corporate governance frameworks, and financial policies.
  6. Shareholder Approval : Seeking approval from existing shareholders through a general meeting.
  7. Application and Documentation : Submitting the necessary documentation, including financial statements, compliance reports and business plans.
  8. Review and Approval : Stock exchange authorities review the application, conduct due diligence and grant approval.
  9. Roadshow and Marketing : Conduct a roadshow to market the company to potential investors and generate interest in the initial public offering (IPO).
  10. Migration and Trading Commencement : Once approved, the company's shares are migrated, and trading commences on the Mainboard.
  11. Post listing compliance : Ensure ongoing compliance with Mainboard listing rules and regulations. Maintain effective investor relations.

Timeline for migration from SME to mainboard

Generally, SME to mainboard migration takes about 3.5 to 6 months . However, the timeline for migration from the SME platform to the Main Board varies based on regulatory process, approvals, stock exchange requirements and company readiness.

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Key Takeaways

  • Migrating from an SME board to the Mainboard is a transformative journey that enhances a company's market standing, financial flexibility, and growth prospects.
  • While migration comes with challenges in terms of compliance, costs, and operational restructuring, the long-term benefits outweigh the hurdles.
  • Proper planning, regulatory adherence, and strategic execution are crucial for a successful transition.
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Frequently Asked Questions

A company listed in the SME segment may migrate to the main board after 3 years since the listing. There are two ways to migrate to the BSE and NSE platforms of the Main Board;

  1. Voluntary Migration: If the post-issue paid-up capital of the company is more than Rs 10 crore but less than Rs 25 crore, the company can voluntarily migrate to the BSE or NSE by passing a special resolution through a postal ballot.
  2. Mandatory Migration: A company has to compulsorily migrate to the Main Stock Exchange if the post-issue paid-up capital is more than Rs 25 crore.
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The most important migration criteria for BSE SME IPOs are listed below:

  • The SME should have been listed on the BSE SME platform for at least 3 years.
  • The paid-up capital of the SME should be more than Rs 10 crores post issue for the securities to be transferred to the mainboard stock exchange.
  • The company should have a market capitalization of Rs 25 crores.

The following are the key migration criteria for NSE SME IPOs:

  • The SME should have been listed on the NSE SME platform for at least 3 years.
  • The paid-up capital of the SME should be more than Rs 10 crores post-issue
  • The company should have a market capitalization of Rs 25 crores.
  • The company must have a net worth of Rs 15 crore.
  • The SME must have a positive operating profit in two out of three years.

Note: On migration to the Main Board exchange of BSE and NSE, the listing entity has to comply with SEBI Listing Obligations and Disclosure Requirements Regulations 2015.

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