BSE aims to reduce SME IPO timeline; launches AI tool to pre-check DRHPs

On an average, shares of around 230 SMEs are traded on a daily basis with the average turnover of around Rs 1,440 crore in June.

BSE has launched a generative artificial intelligence (AI) tool to vet SME IPO documents before they can be formally filed with the exchange, a move that experts believe could cut down the initial vetting process timeline to just a few minutes – it takes weeks now.

According to a circular issued by the exchange, merchant bankers would be given access to a folder to upload the draft documents and the AI tool will quickly highlight areas that need to be reviewed to prepare the final document to be submitted to the bourse.

“With a view to enhance SME Listing experience, the Exchange is exploring and providing a pre-check facility for self-validation of the draft offer document to the Merchant Bankers through use of Generative Artificial Intelligence (AI) technology," stated a circular issued by BSE.

The circular further stated that merchant bankers would be provided access to SFTP (secure file transfer protocol) folders where the draft DRHPs can be uploaded. Thereafter, the AI would analyse the document and generate a report highlighting areas where the bankers need to focus to make the draft offer document ready for formal filing.

Till date, nearly 600 SMEs have been listed on the BSE SME platform while raising a total of nearly Rs 9,500 crore. Currently, the market capitalisation of companies listed on the BSE SME platform is pegged at around Rs 68,507 crore.

Further, if the valuation of the companies that have migrated from the SME segment to the main board is taken into account, then the cumulative market capitalisation would jump to Rs 1.73 lakh crore – nearly 200 companies have made the switch to the main board.

On an average, shares of around 230 stocks are traded on a daily basis with the average turnover of around Rs 1,440 crore in June.

“BSE’s initiative to provide merchant bankers with a generative AI-based pre-check facility marks a progressive shift in the SME IPO ecosystem,” said Makarand M Joshi, Founder partner MMJC and Associates, a corporate compliance firm.

“Validation of draft offer documents before this move used to take approximately a week. This may now be done in around 30 to 40 minutes. This initiative may reduce IPO listing timeline to this extent. This facility is advisory in nature initially. This move empowers intermediaries to identify and resolve potential compliance gaps at an early stage in the IPO process,” added Joshi.

The BSE circular, meanwhile, highlighted the fact that the AI tool has been launched only for the vetting of the draft document and the exchange would still “scrutinize the document holistically” before giving its go-ahead.

“Merchant Banker and relevant stakeholders are requested to note that this pre-filing exercise would facilitate fast tracking of issues relating to preliminary observations and that upon formal filing of the draft offer document, the Exchange would still scrutinize the document holistically before issuing the in-principle approval,” added the circular.