Subsidy for Fund Raising from SME Exchange

What is the SME Exchange listing subsidy in Tamil Nadu?

Subsidy for Fund Raising from SME Exchange is an incentive of the Micro, Small and Medium Enterprises Department, Government of Tamil Nadu. It reimburses part of what a small or medium enterprise spends to take itself public on the SME platform of a stock exchange.

According to the MSME Policy 2021 guidelines issued under G.O. (Ms) No. 37, MSME Department, dated 6 July 2021, the Government offers one-time assistance of 20 per cent of the expenditure incurred for listing, subject to a maximum of Rs 5 lakh, for successful listing on the SME Exchange.

The reasoning is set out in the guidelines themselves. Many small and medium enterprises in the state have the potential to scale up and add employment, but are constrained by inadequate capital. Bank debt has limits; equity does not carry an EMI. The stated objective is "to facilitate high growth potential SMEs in the State to raise equity capital through SME Exchange utilizing IPOs, in both the manufacturing and services sector".

The two SME platforms an enterprise would list on are NSE Emerge and BSE SME. The guidelines do not name them, but define eligibility as small and medium enterprises "located in the State and qualifying to be listed as per the norms of the NSE/BSE".

Who is eligible for the SME Exchange listing subsidy?

Your enterprise can apply if:

• It is a small or medium enterprise located in Tamil Nadu.
• It qualifies to be listed as per the norms of the NSE or BSE, which is a separate and stricter test than the MSME classification.
• It is in either the manufacturing or the services sector, the guidelines cover both.
• It has completed a successful listing on the SME Exchange, following an initial public offering.
• It files the claim within six months from the date of listing.

Your enterprise is not eligible if:

• The IPO did not result in a listing. The assistance is expressly for successful listing.
• The six-month window from the listing date has closed.
• The unit is in a line of activity in the ineligible annexure of the MSME Policy 2021 guidelines.
• The application is for fees other than the eligible heads, such as ongoing annual compliance costs after listing.
• The applicant is not an SME located in the State, for example a company that has its manufacturing or principal operations elsewhere.

There is no separate income or turnover test in the incentive itself. The real filter is the exchange's own listing norms, which cover minimum post-issue paid-up capital, operating track record, net tangible assets, profitability and the appointment of a merchant banker who underwrites the issue.

What expenditure is reimbursed?

The arithmetic is simple and the ceiling binds quickly. An SME that spends Rs 20,00,000 on its issue receives Rs 4,00,000. An SME that spends Rs 40,00,000 receives Rs 5,00,000, because 20 per cent would be Rs 8,00,000 and the ceiling stops it. In most real SME IPOs the ceiling is reached, so the subsidy should be treated as a fixed Rs 5 lakh offset rather than a proportional one.

The subsidy is a partial offset, not a reason to list. A listing brings continuing obligations: quarterly and annual disclosures, corporate governance requirements, an independent board and public scrutiny of accounts. Those costs run every year, and the incentive covers only the one-time issue expenses.

How to apply for and claim the SME Exchange listing subsidy

1. Complete the listing on the SME platform of the NSE or BSE and obtain the listing approval letter. Note the date of listing, it starts the six-month clock.
2. Assemble the expenditure record; merchant banker fees, due diligence fees, registrar and transfer agent fees, peer review auditor fees, exchange fees and listing charges, with invoices and payment proof for each.
3. Get a Chartered Accountant certificate of the total eligible expenditure so that the 20 per cent computation is not disputed.
4. Log in to msmeonline.tn.gov.in, open the Incentives section and select the SME listing incentive.
5. Fill the online application with the enterprise details, Udyam number, listing date, exchange and expenditure claimed.
6. Upload the documents as PDFs of not more than 200 KB each: Udyam certificate, listing approval, certificate of incorporation with MoA and AoA, invoices and payment proof, CA certificate and bank details.
7. Submit within six months of the date of listing, to the General Manager, District Industries Centre concerned, or the Regional Joint Director of Industries and Commerce for Chennai district, and note the reference number.
8. Produce originals at inspection when the department calls for verification; they are returned afterwards.

How to check the status of the claim

1. Use Track Your Status in the incentives section of msmeonline.tn.gov.in with the application reference number.
2. Follow up with the General Manager, District Industries Centre, who is the sanctioning authority for the district.
3. Check the company's bank account for the credit after sanction.

Why SME Exchange subsidy claims fail

• Filed more than six months after listing. The window runs from the listing date, not from the date the invoices are settled.
• The issue was withdrawn or did not complete listing.
• Expenditure heads outside the eligible list, such as advertising or post-listing compliance costs.
• No invoices or payment proof for the fees claimed, so the base for the 20 per cent cannot be established.
• Ineligible line of activity under the annexure to the 2021 guidelines.
• Enterprise not located in Tamil Nadu, despite a registered office address in the state.

Key dates

• Date of listing on the SME Exchange. The single date that governs.
• Six months from listing, the last date to file the claim online.

Unlike most incentives in the Tamil Nadu MSME package, this one does not run from the date of commencement of commercial production. An SME that lists years after it started production still has six clear months from the listing date.

Related incentives to look at

An SME preparing to list will often be eligible for other items in the same package, all filed on the same portal and all with their own deadlines:

• Back Ended Interest Subsidy — 5 per cent interest subsidy for up to 5 years on eligible term loans.
• Reimbursement of Stamp Duty and Registration Charges to 50 per cent for new micro and small enterprises in declared backward blocks.
• Payroll subsidy, employer's EPF contribution reimbursed up to Rs 24,000 per employee per annum for the first three years.
• Subsidy for asset creation for intellectual property to 75 per cent of patent filing cost up to Rs 3,00,000, and 50 per cent of trademark or GI filing cost up to Rs 25,000, both claimable within six months of grant.
• PEACE energy audit incentives, for detailed energy audits and for implementing their recommendations.

Help and grievance route

• General Manager, District Industries Centre of your district, the sanctioning authority.
• Regional Joint Director of Industries and Commerce, Chennai, for enterprises in Chennai district.
• msmeonline.tn.gov.in; Know Your Eligibility, Track Your Status and the entrepreneur Grievance login.
• Industries Commissioner and Director of Industries and Commerce, Government of Tamil Nadu, for scheme interpretation.

There is no fee to file the claim, and the department's dos and don'ts warn enterprises not to be deceived by intermediaries and not to enter false data in an online incentive application.