We know that Stock exchange is a Business platform where traders can buy or sell securities and shares of stock, bonds, and other financial instruments.
It is the most important component of the stock markets such as the primary market and secondary market. It is an organized market where every stock exchange has a management committee which monitor the exchanges done as per the prescribed procedure under the guidelines laid by them.
In addition, stock exchange also hosts and functions auction markets with buyers and sellers, moreover, it plays multiple roles in the economy of a country such as raising the capital for business, supports saving and investments, corporate governance, creating investment opportunities for new and small investors and others.
Today all major trading systems in stock exchanges are dominated by the electronic platform.
The majority of businesses in the Indian stock market take place in two stock exchanges i.e. BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).
In this article, we will discuss the BSE and the listing of companies.
BSE (Bombay Stock Exchange)- Introduction
Bombay Stock Exchange (BSE) is the oldest Indian stock market established in 1875 in Mumbai as the Native Share and Stock Brokers’ Association based on Mumbai. It is also one of the largest stock exchange in India as well as in Asia.
BSE is the first stock exchange to be recognized by the Indian government under the Securities Contracts regulation actin 1957.
As per April 2018, BSE lists about 6000 companies and occupies the tenth position in the world with overall market capitalization shares around $2.2 trillion.
Now BSE switched to automated screen-based trading platform known as BOLT (BSE online trading) with the capacity of 8 million orders per day.
In September 2018 it become the partner of Exchange of the United Nations Sustainable Stock Exchange an initiative of the UN for promoting sustainable development.
It also provides other capital market services including clearing settlement, risk management, and also launches commodity derivatives contracts in gold and silver.
In addition to that, it offers the opportunity for Entrepreneurs to maximize equity capital for growth and expansion of small and medium-sized Enterprises.
Listing of companies in BSE
Listing of the company in BSE have more criteria and procedures as follows:
Requirements for the company to be a list:
- The company must be a Limited Company.
- The company must have a post-issue face value capital of between Rs.1 crore to Rs.25 crores. Entities having a post-issue face value of over Rs.25 crores has to be necessarily listed on the Main Board of the BSE.
- Net Tangible Assets must be a minimum of Rs.1 crore, as per the latest audited financial results.
- Net Worth must be a minimum of Rs.1 crore as per the latest audited financial statements.
- The company must have a track record of distributable profits under Section 205 of the Companies Act, 1956, for at least two out of the immediately preceding three financial years. Otherwise, net worth must be at least Rs. 3 crores.
- The company must mandatorily facilitate trading in DEMAT securities and enter into an agreement with both Depositories, namely, Central Depository Services Limited and National Securities Depository Limited.
- The company must have a website.
- The company should not have any references before the Board for Industrial and Financial Reconstruction (BIFR).
- The company should not have any winding up petition that has been accepted by a Court.
- The issue must be a 100 percent underwritten issue. Merchant Banker must underwrite 15 percent on their own accounts.
- The Merchant Banker to the issue is responsible for market making for a minimum of three years through a stockbroker who is registered as a market maker with the SME Exchange.
- The company must have a minimum of 50 investors while listing in IPO.
Procedure for Listing
The steps given below have the detailed procedure about the listing of a company:
The issuer should consult and appoint a merchant banker for helping in listing in BSE
Then the merchant banker will refer and cross-check the documentation including all financial documents and government approvals and make documentation for IPO (Initial public offering).
In addition to all merchants, bankers must include IPO structure, share issuance, and other financial requirements for planning and documentation.
After the submission of documentation and due-diligence to Exchange, they will verify the documents and process and organize a site visit and interview with the listing advisory listing committee.
After this, if they give a satisfactory opinion about site visits and interview by BSE officials they issue in-principle approval by the recommendation of the committee and provide requirements compiled by the issuer.
On receiving this approval merchant banker will file the prospects with ROC stating the opening and closing of the date of the issue.
On obtaining the approval from ROC they corporate with the exchange regarding the opening dates of the issue along with required documents.
After the closing of IPO (Initial public offering) the company submits the documents as per the checklist to BSE small manufacturing enterprises.
After the completion of the allotment, they issue to notice about trading and listing.
Documents required for listing on BSE
The following documents should be filled by the company with an exchange for listing in BSE:
- 10 copies of the draft offer document.
- Soft copy of the Prospectus for uploading on the website
- Copy of resolution passed by the Board of Directors for the issue of securities
- Copy of the shareholder’s resolution under 62(1)(c) of Companies Act, 2013
- Certificate from the Managing Director or Independent Auditors stating the following:
- The Company has not been referred under the Board for Industrial and Financial Reconstruction (BIFR).
- There is no winding-up petition against the company, which has been stated by the court.
- There has been no change in the promoter of the Company in for one year from date of filing an application to BSE for listing on the SME segment.
- Copy of all notice and orders issued by any regulatory authority such as SEBI, ROC, RBI, CLB, Stock Exchange, etc.
- PAN and TAN of the Company.
- DIN and PAN of Promoters and Directors.
- Printed Balance Sheets, Profit and Loss Accounts, and Cash Flow Statements for the previous five years.
- Copies of major orders or contracts that received and executed should be kept ready and be available for inspection.
- A statement containing particulars of the dates of all the material contracts, agreements including an agreement for technical advice and collaboration concessions and other documents except those entered into in the ordinary course of a business carried on or intended to be carried on by the company together with a detailed description of the terms, subject matter and general nature of the documents.
- Details of the present or any previous application of the Company or Group Company for the listing of any securities have been rejected earlier by SEBI or by any stock exchange with valid reason.
- Name of the exchange which is collaborated to be designated Exchange for the issue, if decided.
- Copies of agreements and memoranda of understanding between the Company and its promoters or directors.
- Articles and Memorandum of Association of the Company.
- A certificate from the statutory auditor or practicing chartered accountant stating the compliance of conditions of Corporate Governance as stipulated in clause 52 of the listing agreement and circular no. SEBI/CFD/DIL/CG/1/2004/12/10 dated October 29, 2004, issued by the SEBI. The company should also give the composition of various committees as required under the legal documents.
- Association, if any, of the directors/ promoters of the Company with any public or rights issue made during the preceding 10 years.
- One Time Listing Fees of Rs. 50,000 or more as applicable Service Tax.
- Date of opening of the public issue to be intimated as soon as it is finalized.