India’s market regulator Securities and Exchange Board of India (Sebi) is considering significant changes to the framework governing small and medium enterprise (SME) public offerings, according to a report by Reuters.
The proposals could bring several requirements closer to those applicable to mainboard IPOs. One of the key ideas under consideration is reserving as much as 50% of an SME issue for qualified institutional buyers (QIBs).
Retail investors could receive 35%, while non-institutional investors may get the remaining 15%.
Sebi Considers Tougher SME Listing Norms
Under another proposal, up to 60% of the institutional portion could be allocated to anchor investors, who commit funds before an IPO opens to other investors.
The regulator is also examining whether to increase the size threshold for companies eligible to list on SME platforms operated by the BSE and NSE.
Companies with paid-up capital of up to ₹100 crore currently qualify for these platforms, which generally have fewer disclosure requirements than mainboard listings.
Sebi is additionally considering higher profitability requirements for companies seeking SME listings. One proposal would require firms to report an average profit of at least ₹3 crore over the previous three years.
The post-issue capital requirement could also be replaced with a market-capitalisation threshold ranging from ₹1,000 crore to ₹4,000 crore.
New Rules Could Reshape SME IPO Market
Other proposals reportedly include allowing existing shareholders to sell stakes through an offer-for-sale mechanism during an IPO. This could reduce the lock-in period for pre-IPO investors from one year to six months.
The regulator is also examining whether single-share trading could be permitted instead of the current ₹2 lakh requirement.
The review follows concerns about fund diversion, governance practices and inflated IPO subscription figures in the SME segment.
More than 250 SME companies raised around $1.2 billion through public offerings last year, while roughly 100 issues have raised less than half that amount so far in 2026.
Legal experts have cautioned that expanding the SME platform could create opportunities for companies to exploit differences between SME and mainboard regulations.
