Small and Medium Enterprises (SMEs) play a crucial role in the economic growth and development of any country. In recent years, the Indian market has witnessed a surge in SME Initial Public Offerings (IPOs), providing these businesses with opportunities to raise capital from public investors. While the IPO listing marks a significant milestone for these SMEs, it also brings forth the responsibility of complying with various post-listing regulations and requirements. In this article, we will delve into the crucial aspects of SME IPO post-listing compliance, highlighting the key obligations that SMEs need to fulfill to maintain transparency and investor confidence.

Quarterly Compliance

One of the primary obligations for SMEs post-listing is the submission of quarterly compliance reports. These reports are a vital aspect of maintaining transparency and keeping investors informed about the company’s financial health and performance. The quarterly compliance report includes financial statements, cash flow statements, and auditor reports. By providing these reports on time, SMEs demonstrate their commitment to compliance and accountability to their shareholders.

In addition to financial reports, SMEs must also disclose information regarding changes in the board of directors, shareholding patterns, and any other significant events that may impact the company’s performance. Timely and accurate submission of quarterly compliance reports ensures that investors are well-informed, helping build trust and confidence in the company.

S. No.	Regulation	Period Cover	Time limit of filling
1.	Regulation 13 (3): Pending, received, disposed, and unresolved Investor queries/complaints need to be completed	April to June July to Sep Oct to Dec Jan to March	Every quarter, within 21 days of the end of the quarter.
2.	Reconciliation of share capital audit report includes the reconciliation of the following: Total issued capital & listed capital. Capital held by depositories in DEMAT. Changes in share capital (quarterly) details. In principle approval obtained by the issuer from all stock exchanges. This report needs to be submitted on a timely basis to the board, SEBI and the exchange.	April to June July to Sep Oct to Dec Jan to March

Half-Yearly Compliance

Along with quarterly compliance, SMEs are required to fulfill half-yearly compliance requirements. These reports provide an overview of the company’s financial performance and operations for the first six months of the financial year. The half-yearly compliance report includes financial statements, auditor reports, and other relevant disclosures.

By adhering to half-yearly compliance, SMEs continue to demonstrate their commitment to transparency and governance. These reports also help investors and stakeholders evaluate the company’s progress and make informed decisions.

S. No.	Regulation	Period Cover	Time limit of filling
1.	As per Regulation 31 (1)(b) Shareholding Pattern (Details of promoters holding in the company), needs to be updated to RoC, SEBI and intimation sent to the exchanges.	April to Sept Oct to March	Within 21 days from the end of the relevant half year.
2.	Regulation 32(8) requires companies to declare the Statement of deviation or variation in the utilization of proceeds/object of issue.	April to Sept Oct to March	Within 45 days from the end of the relevant half year.
3.	Regulation 33(5) requires companies to file Financial Results in a timely manner. Additionally, a press release needs to be issued to exchanges and to SEBI apart from RoC.	April to Sept Oct to March

Annual Compliance

Annual compliance is a significant milestone for SMEs as it provides a comprehensive overview of the company’s financial performance, governance, and future prospects. The annual compliance report includes the audited financial statements, director’s report, corporate governance report, and other necessary disclosures.

This comprehensive report allows investors to assess the company’s financial stability and growth potential. It also reflects the company’s adherence to corporate governance practices, which is vital for building investor confidence. SMEs must ensure timely submission of the annual compliance report to the stock exchanges and regulatory authorities.

S. No.	Regulation	Period Cover	Time limit of filling
1.	Regulation 34(1) requires complete (Financial Statements) to be submitted.	Once in a year	Not later than the day of commencement of dispatch to its shareholders
2.	Regulation 40 (10) (Listing Obligations and Disclosures) requires all obligations (outstanding and fulfilled) to be mentioned. It also requires companies to spell out the disclosures and their impact.	Once in a year	Within 30 days from the end of the financial year

Event-Based Compliance

Event-based compliance comes into play when SMEs experience significant events that may impact their financial position or operations. These events may include mergers and acquisitions, changes in the management team, substantial expansions, or any other material developments.

SMEs are required to disclose such events to the stock exchanges and shareholders promptly. The timely dissemination of information ensures that investors are aware of any changes that might affect their investment decision. Event-based compliance is critical in maintaining transparency and avoiding any potential misinformation or rumors.

S. No.	Regulation	Period Cover	Time limit of filling
1.	Regulation 7 (5) – Intimation of appointment of Share Transfer Agent should be done to RoC, SEBI, exchanges and investors.	Event-based	Within 7 days of Agreement with RTA.
2.	Regulation 28 (1) – In-Principle approval for the financial instrument to be launched.	Event-based	Prior to Issuance of Security.
3.	Regulation 29 (1) (a) – Prior Intimations of Board Meeting for Financial Result needs to be given to authorities and investors.	Event-based	At least 5 clear days in advance (excluding the date of the intimation and date of the meeting).
4.	Regulation 29(3) – Prior Intimations of Board Meeting for alteration in nature of securities needs to be given to authorities and investors.	Event-based	At least 11 clear working days in Advance
5.	Regulation 30(6) – Disclosure of events specified in Part A of Schedule III (Material events) needs to be given to authorities and investors.	Event-based	Not later than 24 hours from the occurrence of an event.
6.	Regulation 42(2) – Record date or Date of closure of transfer books needs to be given to authorities and investors.	Event-based	At least 7 clear working days in advance (excluding the date of intimation and the record date).
7.	Regulation 44(3) – Voting results by shareholders need to be given to authorities and investors.	Event-based	Within 2 working days of the conclusion of Meeting
8.	Regulation 45(3) – Change in the name of the listed entity needs to be given to authorities and investors.	Event-based	Prior approval (before filing a request for a name change with ROC)

Conclusion

SME IPOs offer promising avenues for growth and expansion for small and medium-sized enterprises. However, with the privilege of being publicly listed, SMEs must shoulder the responsibility of adhering to various post-listing compliance requirements. By ensuring timely submission of quarterly, half-yearly, and annual compliance reports, SMEs can demonstrate transparency and accountability to their investors. Additionally, prompt disclosure of event-based compliance ensures that stakeholders are well-informed about significant developments within the company.

Complying with post-listing regulations is not just a legal requirement; it is an essential step towards building a sustainable and successful journey as a publicly listed company. Adherence to these compliance obligations helps SMEs maintain investor trust and confidence, ultimately supporting their long-term growth and prosperity in the market.

Frequently Asked Questions

1. What is SME IPO post listing compliance?

SME IPO post listing compliance refers to the set of regulatory obligations and requirements that small and medium enterprises (SMEs) must adhere to after successfully listing their shares on a stock exchange through an Initial Public Offering (IPO). These compliance measures aim to ensure transparency, governance, and accountability to investors.

2. What are the key regulations governing SME IPO post-listing compliance?

The primary regulations governing SME IPO post listing compliance in India are the SEBI Listing Regulations. These regulations outline the specific rules and guidelines that SMEs need to follow to fulfill their compliance obligations.

3. What are the major components of quarterly compliance for SMEs?

Quarterly compliance for SMEs includes the submission of financial statements, cash flow statements, auditor reports, and disclosures related to significant events during the three-month period. This ensures investors are regularly updated on the company’s financial health and operations.

4. How often should SMEs fulfill their half-yearly compliance requirements?

SMEs must fulfill their half-yearly compliance requirements twice a year. These reports cover the financial performance and disclosures for the first six months of the financial year.

5. What does annual compliance entail for SMEs?

Annual compliance involves submitting audited financial statements, director’s reports, corporate governance reports, and other relevant disclosures that provide a comprehensive overview of the company’s performance and governance practices throughout the financial year.

6. When should SMEs file their quarterly compliance reports?

SMEs must file their quarterly compliance reports within 45 days from the end of each quarter, as per SEBI Listing Regulations.

7. What is the time limit for filing half-yearly compliance reports?

SMEs are required to file their half-yearly compliance reports within 45 days from the end of each half-year period.

8. When should SMEs submit their annual compliance reports?

SMEs should submit their annual compliance reports within 60 days from the end of the financial year.

9. What does event-based compliance involve?

Event-based compliance requires SMEs to promptly disclose significant events that may impact the company’s financial position or operations. Such events could include mergers and acquisitions, management changes, expansions, and more.

10. What is the time frame for filing event-based compliance reports?

SMEs should file event-based compliance reports as soon as possible, usually within 24 hours of the occurrence, to keep investors informed and prevent misinformation or rumors. This is in line with SEBI’s Listing Regulations to maintain transparency and trust.

The Small and Medium Enterprise (SME) sector plays a crucial role in the growth of any economy, contributing significantly to employment generation and innovation. One way for SMEs to raise funds and gain access to the capital market is through SME Initial Public Offerings (IPOs). In this article, we will explore the key intermediaries involved in the SME IPO process and their essential roles in assisting companies to successfully navigate the IPO journey.

1. Securities and Exchange Board of India (SEBI): SEBI, the regulatory body for Indian securities, sets the framework of rules for the capital market. While SME IPO prospectuses do not require direct SEBI approval, all other intermediaries involved in the process must adhere to SEBI’s rules and regulations, ensuring transparency and compliance throughout the IPO journey.
2. Stock Exchanges: The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) serve as platforms for trading stocks. They provide separate SME platforms, namely BSE SME and NSE Emerge, where small and medium enterprises can raise funds and get listed. The stock exchanges play a vital role in reviewing and approving the SME IPO application, DRHP document, facilitating the IPO bidding process, and ultimately listing the shares of the SME IPO.
3. Merchant Banker (Lead Manager): The merchant banker is the first intermediary engaged by the issuing company. They oversee the entire SME IPO process, providing guidance from inception to post-listing activities. Their responsibilities include due diligence, structuring the IPO, preparing the prospectus, and advising the company on various aspects of the IPO journey.
4. Chartered Accountant (CA) and Company Secretary (CS): These professionals are crucial in the due diligence process. They assist in gathering, organizing, and reviewing financial and legal documentation for the IPO. CAs provide insights into the financial health of the company, while CSs ensure compliance with regulatory requirements.
5. Registrar: The registrar plays a significant role in the IPO process by handling the allocation and refund of shares to investors. They maintain accurate records of shareholders and facilitate the issuance of share certificates and demat credits for listed shares[1].
6. Legal Advisor: A legal advisor guides the issuing company through the legal aspects of the IPO, ensuring compliance with applicable laws and regulations. They help draft the offer documents, contracts, and agreements necessary for the IPO process.
7. Banker: The banker is responsible for the collection of funds from investors during the IPO subscription period. They play a crucial role in the smooth functioning of the IPO by handling the transactional aspects of fund collections and refunds.
8. Market Maker: Market makers provide liquidity to the SME IPO shares after listing, ensuring a vibrant secondary market. They create a market for the shares by continuously buying and selling, reducing price volatility and enhancing investor confidence.
9. Underwriter: Underwriters provide a guarantee to the issuing company that any unsold shares will be purchased by them. They help mitigate the risk of the issue not being fully subscribed and play a critical role in ensuring a successful IPO.

SME IPO intermediaries are essential facilitators that support small and medium enterprises in their journey towards public listing and accessing the capital market. They contribute expertise and guidance at every stage of the IPO process, ensuring compliance, transparency, and successful completion of the IPO. For SMEs, IPOs offer an opportunity to raise funds, expand their businesses, and gain visibility in the market, while for investors, they provide an avenue to participate in the growth story of promising SMEs. Overall, SME IPOs play a vital role in fostering economic development and promoting entrepreneurship.

Frequently Asked Questions

SME shares can be bought or sold through stock brokers on specific exchanges like BSE SME or NSE Emerge. Unlike mainboard shares, SME shares are traded in lot sizes, ranging from 10000 shares for prices up to 14, down to 100 shares for prices above 1000. Investors can participate in SME IPOs through ASBA, where the application amount is blocked in the bank account and debited if shares are allotted. SME IPOs offer retail investors opportunities to invest in small and medium-sized enterprises, contributing to capital formation and economic growth.

Yes, retail investors can invest in SME IPOs through ASBA (Application Supported by Blocked Amount). ASBA is a process introduced by SEBI that allows investors to apply for IPOs without transferring the application money to the issuer. Instead, the application amount is blocked in the investor’s bank account until the allotment process is completed. If the investor is allotted shares, the blocked amount is debited from the bank account, and if not, the amount is unblocked and made available for use. This mechanism provides convenience and security to investors participating in SME IPOs, enabling them to apply for IPOs online through their trading accounts linked to their bank accounts.

Retail investors can participate in SME IPOs, offering small and medium-sized businesses in India the opportunity to raise growth capital from the public. While SME IPOs carry risks due to early life stages of SMEs, they provide potential for strong returns. In recent times, SME IPOs have gained popularity, with the average listing day returns being 25%, and oversubscription of over 50 times. Retail investors can invest in these IPOs, contributing to the growth of SMEs in India’s financial markets. As regulatory reforms and increased investor protection boost confidence, retail investors have greater trust in transparency and governance surrounding IPOs.