“Every cloud has a silver lining”. Certainly, this must be the phrase in the wordings of every entrepreneur who runs a small or medium enterprise, as the conditions, rather rigid rules framed by Securities Exchange Board of India (SEBI) for listing the securities in the bourses have been relaxed.

The Small and Medium Scale Enterprise (SMEs) were unable to list on the Stock Exchanges as they were unable to comply with the special SME norms laid down by SEBI on 18th May 2010. These norms required market making for a minimum period of three years apart from the issue of shares to public,required certain minimum requirement in the form of dividend distribution, net tangible assets etc, complying all added to be a vigorous task.

SEBI had indicated that the ITP Regulations are framed with the intention of allowing easier exit options for the informed investors who risk their capital to support SMEs. It will serve as an alternate and easy exit mechanism for most of the investors like angel investors, venture capital funds (“VCFs”) and private equities (“PEs”) from such companies as company would fetch better valuation and easy price discovery mechanism would enable liquidity for the shares of such companies.

Finance Minister P Chidambaram in his annual budget had announced that start-ups and SMEs can get listed on the bourses without bringing IPO. Consequently, capital markets regulator SEBI decided to permit the listing without IPO and trading of specified securities of SMEs, including start-up companies, on Institutional Trading platform (ITP) on the exchanges. SEBI vide its circular no. CIR/MRD/DSA/33/2013 dated 24th October 2013 and Gazette Notification No. LAD-NRO/GN/2013- 14/27/6720 dated 8th October 2013, expressly notified the rules for the SMEs,which appear to be less stringent, for the listing of these SMEs on the Institutional Trading Platform (ITP). Accordingly, BSE also had announced the launch of ITP on November 28th 2013 for accepting the Information Memorandum from the companies for listing on ITP and until now 43 SMEs have listed themselves and are actively trading in the platform.


The salient features of SEBI (Listing of Specified Securities on Institutional Trading Platform) Regulations, 2013 (ITP Regulations) are as follows:

  • Regulation 106 X defines Institutional Trading Platform (ITP) as the trading platform in a SME exchange for listing and trading of specified securities of small and medium enterprises for informed investors.
  • Small and Medium Scale Enterprise means a public company including  Start-up  Company,  that complies with all the eligibility conditions.
  • Regulation 106Y provides for the eligibility criteria:

A small and medium enterprise shall be eligible for listing of its securities on the institutional trading platform, if it satisfies the following:

  • The company, its promoter, group company or director does not appear in the willful defaulters list of Reserve Bank of India as maintained by Credit Information Bureau (India) Limited.
  • There is no winding up petition against the company that has been admitted by a competent court;
  • The company, group companies or subsidiaries have not been referred to the Board for Industrial and Financial Reconstruction within a period of five years prior to the date of application for listing;
  • No regulatory action has been taken against the company, its promoter or director, by the Board, Reserve Bank of India, Insurance Regulatory and Development Authority or Ministry of Corporate Affairs within a period of five years prior to the date of application for listing;
  • The company has not completed a period of more than ten years after incorporation and its revenues have not exceeded one hundred crore rupees in any of the previous financial years;
  • The paid up capital of the company has not exceeded twenty five crore rupees in any of the previous financial years;
  • The company has at least one full year’s audited financial statements, for the immediately preceding financial year at the time of making listing application;
  • Any one of the following criteria:
  • At least one alternative investment fund, venture capital fund or other category of investors/lenders approved by the Board has invested a minimum amount of fifty lakh rupees in equity shares of the company, or
  • At least one angel investor who is a member of an association/group of angel investors which fulfils the criteria laid down by the recognized stock exchange, has invested a minimum amount of fifty lakh rupees in the equity shares of the company through such association/group, or
  • The company has received finance from a scheduled bank for its project financing or working capital requirements and a period of three years has elapsed from the date of such financing and the funds so received have been fully utilized, or
  • A registered merchant banker has exercised due diligence and has invested not less than fifty lakh rupees in equity shares of the company which shall be locked in for a period of three years from the date of listing, or
  • A qualified institutional buyer has invested not less than fifty lakh rupees in the equity shares of the company which shall be locked in for a period of three years from the date of listing, or
  • A specialized international multilateral agency or domestic agency or a public financial institution as defined under section 4A of the Companies Act, 1956 has invested in the equity capital of the company.


  • A company which meets the requirements of the Regulations may  apply  to the  recognized  stock exchange for listing along with the information document containing disclosures as specified under Schedule XIX A of ICDR Regulations.This Information document shall be made available to public through the website of the recognized stock exchange.
  • The concerned recognized stock exchange may issue an in-principle approval to companies eligible for listing on ITP.

A company which has received in-principle approval from a recognized stock exchange for listing of its specified securities on ITP shall be deemed to have been waived by SEBI from rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 for the limited purpose of listing on ITP.The rule requires minimum public offer of at least 25% of its securities through offer document in order to get listed.


  • Not less than twenty percent of the post listing capital of the company shall be held by the promoters at the time of listing and the same shall be locked-in for a period of three years from date of listing.
  • The minimum investment limit is Rs. 10 Lakh.
  • Companies have to enter into agreement with Stock Exchange as per Annexure A to the Regulations.
  • Annexure B provides a listing agreement to be executed by the stock exchanges with the companies seeking listing on ITP.


A company listed on ITP may exit the platform voluntarily after obtaining approval of its shareholders as below:

  • Its shareholders approve such exit by passing a special resolution through postal ballot where ninety percent of total votes and the majority of non-promoter votes have been cast in favor of such proposal;
  • It shall also obtain the SME Exchange's approval.

In the event of any of the following the company would be required to exit the platform within 18 months from the occurrence of such event:

  • The company has been listed on ITP for a period of 10 years;
  • The company has paid up capital of more than twenty five crore rupees;
  • The company has revenue of more than three hundred crore rupees in the last audited financial statement;
  • The company has market capitalization of more than five hundred crore rupees. For the purposes of market capitalization, it shall be calculated based on the average closing price of the shares for the previous three months.

A company listed on ITP shall be delisted and permanently removed from that under any of the following circumstances:

  • Failure to file periodic filings with the recognized stock exchange for more than one year;
  • Failure to comply with corporate governance norm(s) for more than one year;
  • Notwithstanding anything contained above, non- compliance of the condition of listing as may be specified by the recognized stock exchange.
  • SEBI Takeover Code not applicable to direct and indirect acquisition of shares or voting rights in, or control over, a company listed on the ITP.

One of the most important aspects of the aforesaid Regulations is that the company cannot raise capital through any other mode apart from,

  • Right issue
  • Private Placement

In case of Right Issue, there should be no option for Renunciation of right.

However,in case of Private placement,the requirements of obtaining in-principal approval of Stock Exchange, Shareholders approval under Section 81(1A) of Companies Act 1956, completion of allotment within 2 months etc… must be complied with.


These insertions of regulations in the SEBI (ICDR) 2009, has not only made it easy for the SMEs to list themselves but also has slayed down the huge cost associated with listing. Listing on ITPs shall grant existing investors better chances to find buyers. The listing of the SMEs will result in the public accountability of the SMEs providing the benefit of liquidity.

Moreover,the Listing of securities in the stock exchange reflects a good image of the company the benefit of which can be reaped by these SMEs including the availability of loans from the Banks and other Financial Institutions as the listing will enhance companies’ visibility and credibility. The listing will lead to the check on the Corporate Governance of such companies. As the mode of exiting from the platform is also relatively simplified, the migration to the main exchange would possibly be much smoother for a company whose specified securities are listed on the ITP of a recognized stock exchange.

Gopal Bageria, CS trainee.