The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing tighter listing rules for Small and Medium Enterprises (SMEs) to improve market quality while expanding participation for Qualified Institutional Buyers (QIBs).
📌 Key Proposals & Regulatory Reforms:
• Market Cap-Based Board Allocation: – Up to ₹10 Billion ($105.1M): Must list on the dedicated SME platform. – ₹10 Billion to ₹40 Billion: Can choose between the SME or Main Board platform. – Above ₹40 Billion ($420.4M): Must list directly on the Main Board.
• Higher Profitability Threshold: Minimum annual average operating profit for SME IPOs raised 3x to ₹30 Million ($315K) over the previous 3 financial years (up from ₹10M in 2 of the past 3 years).
• Alternative Institutional Route: Companies failing the profit threshold can still list if at least 75% of the net offer is allotted to QIBs (with up to 60% of the QIB portion allocable to anchor investors).
• QIB Share Sale Flexibility: QIBs holding shares for at least 1 year can sell >20% of the total IPO size via the Offer-For-Sale (OFS) route and >50% of their pre-issue stake.
• Expanded Retail Participation: Minimum number of allottees raised to 500 investors to deepen liquidity.
💡 Market Impact: The proposals aim to weed out low-quality listings on the booming SME exchange while ensuring institutional backers have clear, flexible exit mechanisms for high-growth ventures. Public comments are open until November 4, 2026.