Karachi April 20 2022: NCCPL inform that, pursuant to arrangement explained under Pakistan Stock Exchange and based on data provided by CDC, Individual investors holding securities with CDC valuing at least 40 percent higher than the minimum net worth requirement of PKR 5 million prescribed for accredited investor have been auto marked as accredited individual investor in UIN database of NCSS.
The Securities and Exchange Commission of Pakistan (SECP) has approved listing regulations of the Growth Enterprise Market (GEM) Board to enable and facilitate small and medium enterprises (SMEs), greenfield projects, tech start-ups and other companies to conveniently get listed on the Stock Exchange and access capital thereupon.
Small to medium enterprises make up a big chunk of business enterprises in Pakistan. SMEs constitute nearly 90%* of all enterprises in Pakistan. They contribute about 40%* to the annual GDP and employ about 80%* of the non-agricultural labour force. The growth enterprises play a major role in a country’s economy. They provide a large number of jobs and contribute significantly to the GDP of a country. It is not only the government’s job to provide employment but also that of the private sector. Companies which are successful not only provide jobs but also provide diversified products, invest in R&D, create supply chains, increase market outreach and penetration, add to their infrastructure, and increase their production capacity. They also add value to their products and services so that their goods are exportable as well.
Such successful companies can be as diversified as service providers like media production houses & digital media houses, agro-based companies like fruit packagers & exporters, dairy-based companies such as packaged milk producers, and b2b companies such as textile units & IT companies etc. For such companies to succeed in their respective businesses, sufficient funding is necessary. However, the resources of funding while being diverse are costly at the same time.
This is one of the reasons that Pakistan Stock Exchange is incorporating the GEM Board as it not only helps such enterprises in expanding, diversifying and raising capital but also helps the development of the Capital Market of the country which is important for increasing trade, commerce and industry. This (GEM Board) platform will encourage investors to invest in strong, growing and successful companies. By investing in Growth Companies, investors will get the opportunity to benefit from their growth. Investors invest in these companies for capital gain and/ or dividends while the companies receive the much needed capital. In other words, this activity completes an important part of the economic cycle whereby investors get an opportunity to invest and companies get capital to grow.
In order to facilitate companies for listing on the GEM board, Pakistan Stock Exchange has outlined regulations governing listing and trading of equity securities of SMEs. This step will specially pave the way for medium sized enterprises, growth enterprises and even start-ups to get listed on the Stock Exchange.
As per current regulations, in the GEM Board, all licensed security brokers are eligible to act as Advisors, allowing for a greater choice of advisors and consultants for SMEs to choose from. Currently, the minimum free float of shares requirement is 10% which is a nominal percentage of the shares to be listed. This allows for a strong majority of the shareholding to be retained by the owners and directors. At present, it is also possible to offer equity at premium. Also, there is no restriction of minimum number of shares, adding to greater liquidity for the shares trading of the SME. The fees for listing is also quite nominal. The initial listing fees is capped at a maximum of Rs 50,000 only which is a drop in the ocean compared to the benefits a company can reap by listing. The annual listing fees is Rs 50,000/- on Paid-Up Capital up to Rs. 50 Mn, Rs 100,000/- on Paid-Up Capital between Rs 50-100 Mn, and Rs 200,000/- on Paid Up Capital exceeding Rs 100 Mn. This shows that a maximum annual listing fee of Rs 200,000/- (against a Paid-Up Capital exceeding Rs 100 Mn) is a nominal amount that a company of such a size has to pay compared to the huge amounts of capital it can raise in the equity market.
There are a few mandatory requirements for listing on the GEM Board. The company must have audited financial statements of the last two preceding years (or of shorter period if it has been less than two years since commencement of business) wherein the financial accounts should be audited by Quality Control Review (QCR) rated agency. An Information Memorandum (IM) must be prepared in case of a private placement wherein the IM must be shared with interested institutional investors who would like to invest in the privately placed issue. The company must publish its financial statements on their website whereas the website must contain basic company information, Information Memorandum (IM), and half yearly progress providing status of commitments mentioned in the IM.It is pertinent to mention that the companies going public on the GEM Board have fewer compliance and regulatory bindings. Keeping this in view, only Institutional Buyers and NCCPL registered eligible investors will be able to invest in shares of GEM Board listed company.
There are a few pre-listing requirements regarding the Information Memorandum. The IM shall be circulated to institutional investors and eligible individual investors, they shall be placed on the website of the Growth Company, the Exchange and the Advisor/ Consultant to the Issue. The IM should contain the minimum information/ disclosures as contained in the Schedule I of Chapter 5A of PSX Rule Book.
For post-listing, there are a few compliance requirements such as the issuer is required to disclose and disseminate Price Sensitive Information, the CEO of the Issuer responsible for regulatory compliance must submit compliance report at the end of each half-year.
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