SME to Mainboard Migration – Benefits, Eligibility Criteria and More

SME to mainboard migration is a key step for most of the small and medium enterprises listed on stock exchanges in India. The migration of SMEs to the mainboard results in the listed securities being transferred from the SME platform to the mainboard exchanges. This migration from SME to mainboard has several benefits for company owners as well as investors. Nevertheless, companies need to fulfill SME migration criteria before shifting to mainboard exchanges of BSE and NSE. In this article, we take a closer look at the benefits and eligibility criteria of SME to mainboard migration.

Benefits of SME to Mainboard Migration

Here are the key benefits of SME IPO migration from the SME exchange to the mainboard exchanges (BSE and NSE):

• Removal of Lot Size and Access to Larger Capital – Stocks listed on SME exchanges in India are available in lot sizes where minimum investment is INR 1,00,000. As intended, it effectively makes the SME stock unavailable to a large section of investors. However, migration from SME to mainboard removes this restriction and stocks can be traded in minimum 1 share or multiples thereafter. Naturally, migration opens access to a bigger set of investors and capital.
• Better Valuations – As mentioned above, migration to mainboard exchange attracts more investors. The combination of lower ticket size and bigger set of investors aides in better value discovery.
• Possibility of Dual Listing – SMEs can list on the BSE and NSE mainboards after migration. This expands their investor base.
• No Market Maker Requirement – Companies listed on SME exchanges are required to appoint a market maker but this requirement goes away when the company shifts to mainboard. This reduces compliance costs.
• Change in Stock Group and Margin – The SME’s stock group changes to a lower margin group after migration. This makes it more attractive for investors.
• Enhanced Credibility and Visibility – Listing on the mainboard increases the credibility and reputation of the company and visibility among the investors and other stakeholders. This is a mark of the company’s skill in pushing transparency and governance.

Migration Data So Far

As of 16 May 2024, a total of 891 companies listed together on the BSE SME and NSE SME exchange in India. Out of these, 324 companies have migrated to the main board exchange. Number of companies migrated to the BSE and NSE are as follows:

Read Also: Benefits of SME IPO Listing – Advantages and Disadvantages of Stock Market Listing

Migration of BSE SME to BSE Mainboard

Eligibility Criteria for BSE SME Migration to Mainboard

These are the major eligibility conditions for SMEs already listed on the BSE SME platform to migrate to the Mainboard exchange of the BSE:

• The post-issue paid-up capital of the applicant company is INR 10 crore or more, as well as the minimum market capitalization of INR 25 crores.
• The applicant company must have a minimum net worth of INR 15 crore for the preceding 2 full financial years.
• A history of positive operating profit (EBITDA) for 2 of the last 3 years.
• The applicant company should be a listed entity at BSE SME for a minimum duration of 3 years.
• The latest shareholding pattern should show a minimum of 250 public shareholders of the applicant.
• The Promoter is holding 20% of equity to be held on the day of filing of application.
• The migrating SME’s promoters and/or directors must not have been debarred or banned by SEBI.
• No winding-up petition should have been admitted against the company by NCLT (National Company Law Tribunal).
• No significant regulatory action like trading suspension should have been taken against the company in the past 3 years.
• The migration requires passing a special resolution with at least 2/3rd votes from public shareholders, excluding promoters.

Documents Checklist for BSE SME Migration to Mainboard

Documents required for migration from BSE SME to BSE Mainboard with in-principle approval:

• Shareholders were sent a printed copy of the AGM/EGM notice seeking their approval on the migration.
• Resolutions of the shareholders and board of directors and a certified copy concerning the migration.
• Scrutinizer report to provide the results of voting by public shareholders.
• Format Filled up & Signed by the company secretary/managing director.
• Processing fee of INR 2,00,000 or 0.05% of market capitalization, whichever is higher.
• No complaints or clean track record of the company.
• Hard copy and soft copy of the information memorandum duly signed by the company secretary or managing director.
• The company’s latest shareholding pattern is not older than 15 days when the migration application is submitted to the exchange.
• Confirmation from the CS, MD, or compliance officer stating that promoters or directors are not in any violation of practices.
• Confirmation from a merchant banker, statutory auditor, or compliance officer stating the weighted average market capitalization of the preceding 20 trading days.
• Company promoters’ and directors’ PAN details.
• Corporate governance compliance report duly signed by the Chief Executive officer or compliance officer.

Migration of NSE SME to NSE Mainboard

Eligibility Criteria for NSE SME Migration to Mainboard

Here are the key eligibility criteria for SMEs listed on the NSE Emerge platform to migrate to the NSE Mainboard exchange:

• The paid-up equity capital of the SME company wishing to migrate should be a minimum of INR 10 crore.
• The market capitalization of the migrating company shall not be less than INR 25 Crore.
• The company must have a net worth of at least INR 50 crore after deducting accumulated losses.
• The applicant should have been listed on the SME platform of the exchange for at least 3 years.
• The total number of public shareholders on the last day of the preceding quarter from the date of application should be at least 1000.
• The company/entity has positive cash accruals (earnings before interest, depreciation, and tax) from operations for each of the 3 financial years preceding the migration application and has positive profit after tax in the immediate preceding financial year of making the migration application to exchange (along with the working).
• The applicant company has not referred to the Board of Industrial & Financial Reconstruction (BIFR) &/OR no proceedings have been admitted under the Insolvency and Bankruptcy Code against the issuer and Promoting companies.
• The company has not received any winding-up petition admitted by NCLT.
• The company has made disclosures for all material Litigation(s) / dispute(s) / regulatory action(s) in the past three years to the stock exchanges where its shares are listed in an adequate and timely manner.

Documents Checklist for NSE SME Migration

An SME company listed on the NSE Emerge that wishes to migrate to the NSE mainboard must submit the following documents to the exchange along with the migration application.

• Migration Confirmation from the SME company is to be filled in the format prescribed by the exchange.
• Auditor’s certificate on the net worth of the company.
• Auditor’s certificate on the details of the use of funds raised from public.
• Company details (SCORES authentication ID, Investor grievance redressal mechanism, change in company control since listing, etc.) in the prescribed format.
• Certificate of the company on compliance with SEBI (Listing and Disclosure Requirements) regulations.
• A certified copy of the board members’ resolution for the proposed migration from SME to the main board.
• Certified copy of the postal ballot to obtain shareholders’ approval for the migration.
• Information memorandum.
• Scrutinizer report providing the results of promoters and public voting.
• Certified copy of the shareholder resolution approving the migration.

SME Migration to Mainboard FAQs