Stories
SEBI Proposes Major Overhaul of SME IPO Rules to Boost Liquidity and Investor Protection
- •SEBI has proposed shifting SME listing eligibility from paid-up capital to post-issue market capitalisation, requiring companies valued up to Rs 1,000 crore to list on SME platforms.
- •The average annual operating profit requirement is proposed to be raised to Rs 3 crore over three years, up from the existing requirement of Rs 1 crore.
- •The minimum application amount would be reduced to Rs 1 lakh across four lots, while the secondary-market trading lot is proposed to be cut down to a single share.
- •SEBI plans to remove compulsory market making, inventory requirements, and mandatory 100 percent underwriting, aligning SME IPOs closer to main-board frameworks.
- •Public comments on the proposed regulatory changes are invited by SEBI until November 4, 2026.
Key Questions Answered
SEBI has proposed determining SME IPO eligibility based on post-issue market capitalization instead of paid-up capital. Companies with a post-issue market capitalization of up to Rs 1,000 crore must list on SME platforms, while those valued between Rs 1,000 crore and Rs 4,000 crore can choose between SME and main-board listings subject to reporting requirements.
SEBI proposed raising the average annual operating profit requirement to Rs 3 crore over three years, replacing the previous requirement of Rs 1 crore in two out of three years. Companies failing to meet this can still raise funds via book-building if at least 75 percent of the issue goes to qualified institutional buyers, otherwise triggering a full refund.
SEBI plans to remove compulsory market making, related inventory requirements, and mandatory 100 percent underwriting for SME IPOs, including lead managers' obligations. Instead, standard main-board underwriting frameworks and the 90 percent minimum subscription requirement would apply.
