Benefits of Listing

There are 4 key benefits of Listing:

Wealth Creation

  • Unlocking Value: Listing provides an unparallel value unlocking opportunity to the promoter confined SMEs.
  • Access to Capital: Promoters have the unique opportunity to equity capital access thereby improving the balance sheet strength for future leverages.
  • Shares as currency: Use of shares for takeovers / Merger & Acquisition transactions, leading to inorganic growth.
  • Profile Building: Significant positive addition to the corporate brand value resulting in multiple monetary & non-monetary benefits.
  • No great dilution of equity and control: Since the current norms only allows the promoter to off take 25% equity, the equity and operational control always remains with the founders/promoters.

Operational Benefits

  • Improves Credit Rating: The upside of the branding correspondingly results in credit rating which allows corporate to lower the interest burden on the existing and future debts.
  • Enhanced Visibility: The most coveted advantage of the SME listing as it increases the corporate brand for all the concerned stakeholders generating innumerable tangible and intangible benefits. Listing raise a company’s public profile with customers, suppliers, investors, financial institutions, Media and all the other stakeholders.
  • Creation of Collateral Asset: Increase in liquidity of shares after listing would enable company to raise loans through collateral of listed shares.
  • Increases Negotiation Power: Significantly enhances the negotiation power of the corporate in terms of:
    • Prices
    • Terms and Conditions
    • Credit Period

Tax Benefits

  • Tax Benefits for Capital Gain
S. No. Capital Gain Tax Unlisted Listed
1. Long-term Capital Gains 20% NIL
2. Short-term Capital Gains 30%* 15%

*Depending upon assessee’s income slab.
In case of listed share securities transaction tax (STT) must have been paid.

  • Tax on Buy Back of Shares: Unlisted companies are subject to withholding tax @20 % on buy back of share. Listed companies are not subject to this provision.
  • Tax on Infusion: Unlisted Companies Subject to 30% tax on issue of new shares at a premium exceeding fair value.

Governance

  • The listed entities are subject to various statutory compliances thereby increasing transparency and corporate governance.
  • The listed entities are more likely to have experienced professionals which ultimately results in enhanced valued for all the stakeholders.
  • Good corporate governance leads to built confidence amongst all the stakeholders of company.