How to raise funds through NSE Emerge platform 

For small and medium-sized enterprises (SMEs), access to funding is crucial for growth and sustainability. One way to raise funds is through the National Stock Exchange (NSE) Emerge platform. This platform provides a platform for SMEs to raise capital through initial public offerings (IPOs). In this article, we will discuss how to raise funds from the NSE Emerge platform.

Understanding the NSE Emerge Platform

The NSE Emerge platform is a dedicated platform for SMEs to raise funds through the issue of securities. The platform was launched in 2012 and has since helped many SMEs in India to raise funds. The platform offers a transparent and efficient way for SMEs to access the capital markets and raise funds from investors.

The NSE Emerge platform is an electronic platform that facilitates the listing and trading of securities issued by SMEs. The platform allows SMEs to list their securities and raise funds from investors. The securities listed on the platform include equity shares, preference shares, and debentures.

To be eligible for listing on the NSE Emerge platform, an SME must meet certain criteria. The criteria include a minimum net worth of Rs. 3 crores, a minimum track record of 3 years, and a positive net worth. The SME must also have audited financial statements for the last 3 years and a minimum of 100 shareholders.

Understand the eligibility criteria

Before applying for an IPO on NSE Emerge, it is important to understand the eligibility criteria. To be eligible, the SME must have a minimum paid-up capital of Rs. 1 crore and a maximum of Rs. 25 crore. The company must also have a track record of at least three years and a positive net worth in the latest audited financial statements.

Steps to Raise Funds through the NSE Emerge Platform

Appoint a merchant banker

To raise funds on NSE Emerge, an SME must appoint a merchant banker. The merchant banker is responsible for preparing the prospectus, conducting due diligence, and valuing the SME. The merchant banker also plays a crucial role in marketing the IPO to potential investors.

Prepare the prospectus

The prospectus is a document that provides detailed information about the SME and the IPO. The prospectus must comply with the SEBI regulations and include information such as the company’s financials, business model, management team, and risks associated with the investment. The prospectus must also contain a statement of the IPO price and the number of shares to be issued.

Valuation of the SME

Valuation is the process of determining the worth of the SME. The merchant banker uses various valuation methods such as discounted cash flow (DCF), price-earnings (P/E) ratio, and net asset value (NAV) to determine the fair value of the SME. The valuation is an important aspect of the IPO as it determines the IPO price and the number of shares to be issued.

Pricing the IPO

The IPO price is determined by the merchant banker based on the fair value of the SME. The IPO price is usually higher than the fair value to account for market volatility and investor demand. The IPO price is set through a book-building process, where potential investors bid for the shares. The IPO price is then set based on the highest bid price.

Conduct due diligence

Due diligence is the process of verifying the information provided in the prospectus. The merchant banker conducts due diligence on the SME to ensure that the information provided is accurate and complete. Due diligence is a critical process as it ensures that potential investors have access to reliable information.

Listing on NSE Emerge

Once the IPO is oversubscribed, the shares are allotted to investors, and the SME is listed on NSE Emerge. The SME must comply with the SEBI regulations for listed companies and submit regular disclosures such as quarterly financial statements, annual reports, and other regulatory filings.

Raising funds through the NSE Emerge platform can be an excellent way for SMEs to raise capital and grow their businesses. However, it is important to understand the eligibility criteria, appoint a merchant banker, prepare a prospectus, conduct due diligence, and price the IPO appropriately. By following these steps, SMEs can successfully raise funds through the NSE Emerge platform and achieve their growth objectives.