Listing shares on the NSE (National Stock Exchange), the largest exchange in India which offers various benefits to companies such as it helps you raise capital, enhancing liquidity, unprecedented reach, and improving brand visibility. There are 2 ways through which companies can get listed on NSE – IPO and New Listing.
While an IPO is a process by which a company offers its shares to the public for the first time, New Listing is a process in which a company already listed on any other stock exchange approaches another exchange(s). However, to get your company listed on NSE, you first have to fulfill the eligibility requirements and go through the process specified by the exchange.
Eligibility criteria for getting listed via IPO on NSE
Below is the list of requirements that a company needs to fulfill to start its process of getting listed on NSE.
Conditions that need to be fulfilled by an applicant in either of the methods
Whether the applicant wants to get itself listed on NSE via IPO or New Listing, in addition to the above-mentioned conditions, they need to fulfill the below criteria as well to be eligible.
- Furnish annual reports of 3 preceding financial years to NSE of either of the following:
- The applicant applying for listing
- The promoters of the company, incorporated in or outside India
- A partnership firm that has been converted into a company (for not more than 3 years) and has fulfilled all the conditions laid down by SEBI in this regard
- The applicant also needs to satisfy the exchange on the following grounds:
- Redressal mechanism for grievances
- Exchange should be notified if there are any pending grievances against the issuer, its listed subsidiaries, and the top 5 listed group companies by Market Cap
- Exchange should be made aware of arrangements or mechanisms put in place for redressal of investor grievances
- Defaults in payments
- If there is any default by an applicant or its promoters/group companies/subsidiary companies in payment of interest and/or principal to debenture/bond/fixed deposit holders, then the company will not get listed until all the obligations related to payment are completed
- Redressal mechanism for grievances
Eligibility criteria for companies that are already listed on other exchanges to get listed on NSE
If a company wants to get listed on NSE apart from any other exchange it is already listed on, it needs to fulfill the eligibility criteria mentioned below along with the common requirements mentioned above. However, you must note that the below criteria are not valid for companies that are SME listed.
- The net worth of the applicant for each of the 3 preceding financial years shall exceed ₹75 crores
- The applicant company must have paid dividends in at least 2 out of 3 financial years (immediately preceding the year in which the application is been made)
Positive EBITDA in each of the 3 preceding financial years
The average market capitalization* of the company has to be more than ₹1000 crore for a period of 6 months prior to the date of application
*Herein the threshold of market capitalization is calculated as the average daily market capitalization for the 6 months prior to the date of application
- The company should disclose all material litigation(s)/dispute(s)/regulatory action(s) to all the stock exchanges where its shares are listed
- Other conditions that an applicant company needs to fulfill:
- Should have been listed on any other recognized stock exchange for at least the last 3 years or on an exchange having nationwide trading terminals for a period of at least 6 months
- The minimum average daily turnover during the last 6 months should be ₹ 10 lakhs & minimum average daily trades during the last 6 months should be 50 (count)
- Should have at least 1000 public shareholders on the last day of the preceding quarter from the date of application
- The listing application should not have been rejected in the last 6 months
- Should not have any going concern, adverse opinion, or disclaimer of opinion pertaining to the financials
- Securities of the company should have been trading above the face value for 6 months preceding the date of application
- Should have completed the cooling period of the 2 months which starts from the date when security has come out of the trade-to-trade category or any other surveillance action (excluding companies under ASM) by other exchanges where the security is actively listed
Reasons NSE may reject the listing application
NSE reserves the right to reject the listing application because of any of the following reasons:
- The applicant fails to fulfill the eligibility requirements set by the exchange
- The application is not completed in all respects
- The application doesn’t contain the required additional information by NSE
- The exchange believes the application to be false and/or misleading
- Any other reason as NSE may find appropriate
What an investor should do in such a situation?
As an investor, if you are holding shares of a particular company that is listed on BSE or any other stock exchange but gets rejected while listing on NSE, here’s what you can do.
- Find out the reason why NSE rejected the listing application
- Take a decision about your holding or new investment based on the reason for rejection
- NSE may reject the application if there is any pending grievance against the company like promoters are fighting a battle in court or there is a case against the company. In such a situation, as an investor, you would need to rethink your decision regarding your holdings of the company or investing in the company.
- If there is a discrepancy in the company’s financials or ITR, then NSE holds the right to reject the application based on non-fulfillment of eligibility criteria. In this case, you might want to evaluate and make an informed decision.
NSE is one of the leading stock exchanges in India. A company can enjoy a bundle of benefits such as a comprehensive marketplace, large-scale trading, ease of settlement, and more after getting itself listed on NSE. However, to get a company listed on the exchange, an applicant first needs to make sure it fulfills the requirements laid down by the exchange. Once the company has fulfilled the eligibility criteria, here are the next steps that it needs to take to get listed via IPO.