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Inside SEBI’s 10 Key Proposed Changes To SME IPO Rules

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Inside SEBI’s 10 Key Proposed Changes To SME IPO Rules

The Securities and Exchange Board of India (SEBI) has proposed sweeping changes to the rules governing initial public offerings (IPOs) of small and medium enterprises (SMEs). 

In a consultation paper floated on October 14, the markets regulator has proposed changes to SME IPO norms, including regulations pertaining to valuation thresholds, profitability and shareholder exits. The regulator has invited public feedback on the paper till November 4. 

Citing its rationale, the regulator said that the paper has been formulated by its working group due to rapid increase in the funds raised through SME IPOs and the number of investors participating in such issues. 

Since launch in 2012, about 1,500 companies have opted to list on the SME platform and have raised ₹40,222 Cr. Startups like Zappfresh, DroneAcharya, TAC Infosec, Yudiz, are a few startups that have also taken this route to go public.

In view of this, the regulator has proposed multiple changes, including lowering the minimum application threshold and removing mandatory underwriting and market-making requirements.

Here’s a look at some of the key changes that have been proposed:

Under the proposed framework, companies with a post-issue market capitalisation of ₹1,000 Cr or less can now list on the SME platform. Those valued in the range of ₹1,000 Cr to ₹4,000 Cr can also choose to list either on the SME platform or the main board. Companies valued over ₹4,000 Cr will have to list on the main board.

SEBI has also proposed replacing the existing paid-up share capital criterion with post-issue market capitalisation to determine whether a company can list on the SME platform or the main board.


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