Iran SME market; all the practicalities!

In our last article about Iran’s SME market, we approached the matter with a hint of introduction and generalities. Now, we are going to depict a clearer picture of all the practicalities one needs to know before entering the market.

In Iran’s SME market, which is a part of Iran Fara Bourse, companies shall acquire a quorum from the “checklist” before even trying to get listed on the trading board. These firms will enjoy the advantages of the capital market along with more exclusive pros dedicated just to the SME market.

Companies in Iran’s SME market can be traded on two different boards:

1. Knowledge enterprises; and
2. Growth enterprises;

There are great benefits for the companies listed on both boards, including but not limited to:

• The easy apply: Listing criteria for Iran Fara Bourse SME market enable a wide array of Iranian firms to apply for admission in a short period of time.
• The free marketing: Being listed on any markets of Iranian stock exchanges can be quite in favour of companies since they will gain more reputation and their brand name will be more credible once they have a ticker on the trading board.
• The easement on getting a loan: All listed shares on IFB can be collateralized for a loan application with banks and credit institutes.
• The more reliable financing: Getting their hands on cheap yet reasonable finances is the most daring challenge that a small to mid-sized business can face. By getting listed on Irans’s SME market, those firms will have more options to choose the best-fit finances they need. Issuing Islamic debt securities (Sukuk securities) is considered the most effective choice for SMEs these days.
• The attractive tax incentives: Listed shares on IFB will enjoy a tax exemption of 5% at least. In case the ticker has 20% free float at the end of its fiscal year, the incentive can be duplicated to 10%. Taxes on share transfers are also as low as 0.5% upon the sales of securities; the policy-makers have a decision to get it even lower by 80%.
• The better information disclosure: Since there are certain disclosure requirements for any listed ticker, the level of transparency is higher than conventional investments, which eventually leads to more investors for the company.
• Going up the ladder will be easier: Over the life cycle of a business, there is a time that the company needs serious finances with acceptable Cheque sizes. Applying for Iran’s SME market will make the bed for these small firms to level up eventually in the capital market boards and get more serious with their life stage.

Now that we have discussed the pros of getting listed on Iran’s SME market, it is time to write a bit about the listing requirements:

• Company size: A minimum of IRR 1 bn and a maximum of IRR 500 bn;
• Traction: At least a year shall be passed from the registration date;
• Information disclosure: The company’s auditor shall be chosen only from SEO’s most trusted list;
• Auditor’s report: There shall be no rejection or refusal from declaring the auditor’s opinion for the last fiscal year;
• Profitability: Other than profitable firms, the ones making loses can also be listed on Iran’s SME market provided that they can come up with a reasonable operation action plan to end these loses;
• Type of incorporation: They must be registered as public joint stock companies. Private firms shall change the incorporation type within the 6-month period of the admission process; and
• Board members: There shall be no criminal record, open judicial cases, bad reputation or important legal claims on each of the board members and the firm.

The below table is to demonstrate the differences of getting listed on each IFB trading boards:

Steps Towards Admission:

1^st step:

• Admission request;
• IFB assessment;
• Meeting with board members (if required);
• Providing more necessary documents; and
• Report from IFB specialists.

2^nd step:

• Admission committee decision; and
• Announcing the results.

3^rd step:

• Legal personality changed to public join stock status;
• Registration with SEO;
• Depositing company’s shares in CSDI;
• Information disclosure; and
• Updating the AoA (prospectus).

4^th step:

• Listing on Iran Fara Bourse SME market.

5^th Step:

• Recording the ticker on the post-trade platform.

Iran’s SME market Commissions:

The admission fee is equal to 0.002% of registered capital capped at IRR 200 mn. There is an annual listing fee of 0.002% of registered capital capped at IRR 100 mn as well.

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DISCLAIMER:  This report has been prepared and issued by Agah Brokerage Firm on the basis of publicly available information, internally developed data and other sources believed to be reliable. The information contained herein is not guaranteed, does not purport to be comprehensive and is strictly for information purposes only. Agah does not assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Any expressions of opinions are subject to change without notice.