- 1. From a Giant Idea to a Giant Enterprise Pavan Kumar Vijay
Managing Director 28 thMarch 2010
2. Agenda
- Characteristics of Indian MSMEs
- Challenges faced by MSMEs
- Key Considerations for IPO Success
- Capital Market Framework IPO by MSMEs
3. Facts about MSME sector
- Contributions of the Sector:
- Contribution to the industrial output - 45%
- Contribution to exports - 40%
- Contribution to employment
-
- 5.9 Crore over 2.6Crore enterprises
-
- one million jobs every year
- Contribution in production -more than 6000 quality products for
the Indian and international markets.
Source: Annual Report 2009-10 of Ministry of MSME 4. Facts about
MSME sector
- Growth of MSME via other sectors
Source: Annual Report 2009-10 of Ministry of MSME * (IIP Base
2001-02) 5. Facts about MSME sector
- Type of Organization Structure
Source: Annual Report 2009-10 of Ministry of MSME Type of
Organization Structure Number % Proprietary 1402816 90.36
Partnership 59,817 3.85 Pvt. Company 41,703 2.69 Pub. Ltd. Company
8,217 0.53 Cooperatives 4,644 0.3 Others 35,294 2.27 6.
Characteristics of Indian MSMEs
- Spread across industry at different stages of maturity
- Non corporatize organization structure
- Lacking in infrastructure support w.r.t.
-
- No clear policies for exit for ensuring capital efficiency
7. Challenges faced by MSMEs
- Lack of information and unawareness.
- Absence of Skilled & Professional Manpower.
- Follow up with various agencies in solving regular activities
and lack of interaction with government agencies on various
matters.
- Absence of adequate and timely banking finance.
- Non-availability of suitable technology.
- Low production capacity (Denial of Economies of Scale).
- Ineffective marketing and identification of new markets.
- Constraints on modernization and expansions.
8. Needs of MSMEs
- Introduction and implementation of ICT
9. Typical Funding lifecycle Revenue Time Valley of Death Angels
Founders VC Investors Public Markets Seed Capital A B C Mezzanine
EarlyStage Later Stage IPO Secondary Offerings The Chasm The Wall
Seed or Start-up : Market research and product development. Early
Stage :Funding full-scale operations and selling
products/services.Not yet profitable. Later Stage :Funding
expansion and new products.Near break-even. PE Investors 10.
Typical Exit Options forPre-IPO Investors
- Selling stake to strategic investors
- Initial Public Offering (IPO) in India or overseas
- Sale to any other private equity fund or venture capital
fund
- Merger with an existing listed company
- Management / Company buy-backs
11. Financing Options An analysis 12. Key Considerations for IPO
Success Scalability of Business Valuation of Business & Its
verticals Corporate Governance Marketing & Branding Reaching
the Stage of Development for IPO Capital Market Framework Business
Structure Development of Financial Projects MSME 13. Key
Considerations Contd .
-
- Total Market Size vs. Tapped Market Size
-
- Stage of Development of Market Niche, Developing,
Saturated.
-
- International Application of Business
-
- Infrastructure Requirements
-
- Diversified Business in Single Entity
-
- Distinguished Business Verticals
14. Key Considerations Contd .
- Value of Business & Its verticals
-
- Past Financial Performance
-
- Composition of Board of Directors
-
- Transparent Policies & Procedures
-
- Audit and Disclosure of Financials
-
- Investors Grievance Redressal
15. Key Considerations Contd .
-
- SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009 Chapter XA
-
- Separate Stock Exchange Platform for MSME
-
- Equity Listing Agreement for SME Shares.
16. Key Considerations Contd .
- Reaching the Stage of Development for IPO
-
- Minimum Dilution of Shareholding
- Development of Financial Projections
-
- Identification of Stages of Project Development
-
- Development of Balance sheet and P & L Figures
17. Capital Market FrameworkIPO by SMEs
- SEBI (ICDR) Regulations, 2009
- Capital Market Benefits for SMEs
-
- No requirement of Minimum Tangible Assets, Distributable
Profits, Minimum Net worth etc.
-
- No requirement of filing DRHP with SEBI and waiting for its
observations
-
- No need of filing Certificates and documents with SEBI before
Final Offer Documents
-
- No requirement of obtaining In-principal approval from stock
exchange before IPO
18. Capital Market Framework IPO by SMEs
- Capital Market Benefits for SMEs
-
- Minimum No. of allottees is 50 as compared to 100 for other
companies.
-
- Separate Stock Exchange Platform for SMEs
-
- Easy Compliances under Listing Agreement
-
-
- No need of sending full report to investor Only salient
details
-
-
- Submission of Unaudited results on Half yearly basis instead of
Quarterly Basis
-
-
- No need to publish financial results in newspapers
19. Capital Market Framework IPO by SMEs
- Additional Conditions for SMEs
-
- Mandatory Underwriting for 100% of Issue Size
-
- Minimum Application size of Rs. 1 Lac
-
- Compulsory Market Making for minimum 3 years
-
- Minimum Trading size of Rs. 1 Lac
-
- Facility of Fast Track Issue is not available
20. Capital Market Framework IPO by SMEs 21. IPO Process for
SMEs In-principal Approval from Stock Exchange Marketing Phase of
Issue Preparatory Phase of Issue Final Phase 22. Critical IPO
Timeline for MSMEs Time Saved Approx. 2-3 months 23. Sweet Tastes
of IPO
- Economical source of finance
- Inculcation of professionalism
- Transparency of operations
- New Ownership opportunities
- Offer premium Market Capitalization
- Exit Route for Existing / Future Investors
24. The Right Recipe
- for a successful IPO, Companies with
- a convincing and realistic business plan,who have done
theirhomeworkright, can have a successful run in the capital
markets and
- have a sweet taste of IPO!!!
25.
- Corporate Professionals Capital Pvt. Ltd
- SEBI Registered Category I Merchant Banker D-28, South
Extension -I, New Delhi-110 049 Ph: 011-46046370
Email:[email_address]