SEBI Eyes Comprehensive Review of SME IPO Regulations to Reduce Costs

 SEBI is set to undertake a comprehensive review of the rules governing IPOs for small and medium enterprises (SMEs), as per The Economic Times news report.  

With a focus on reducing costs related to market-making and underwriting systems, a working group has submitted its report, paving the way for a consultation paper. 

SEBI's Targeted Improvements for SME IPOs 

According to SEBI's chief, Tuhin Kanta Pandey, a comprehensive review is planned for the current rules governing SME IPOs. The focus will be on enhancing the effectiveness of the market-making and underwriting systems. These areas have been identified as cost-intensive for small companies, limiting their access to public markets. 

One major issue with the current regulations is the ineffective operation of underwriting systems, which forces companies to bear high costs. The working group has highlighted these concerns in their report submitted to SEBI. 

Cost Concerns and Proposed Adjustments 

Market-making expenses add substantial costs for SMEs planning IPOs. The announced review aims to address these concerns by considering regulatory adjustments. Such adjustments are expected to align the cost structures of SME listings closer to those on the mainboard. 

The SEBI chairman further revealed that increasing trading lot and application sizes to control retail participation did not meet the expected outcomes. 

Initiatives to Promote Global Fund Management 

SEBI is also focusing on support for global fund management activities in India. This move involves changes to portfolio management services regulations, which would allow trading to be facilitated from onshore. 

Read More: Puravankara Share Price Gains Over 7% After Q1 FY27 Earnings Results: Total Income Up 62.8% YoY! 

Upcoming Consultation and Next Steps 

SEBI plans to release a consultation paper soon, covering various aspects of the SME platform as outlined in the working group's report. The consultation will seek stakeholder opinions, aiming to refine and enhance the accessibility of IPOs for small and medium enterprises. 

Moreover, SEBI's recent initiatives include a new system for determining closing prices of frequently traded securities, aimed at identifying manipulations much faster than the previous mechanisms allowed. 

Conclusion 

SEBI is initiating a review of SME IPO rules focusing on cost reductions in market-making and underwriting systems. A working group has submitted insights, and a consultation paper will follow to advance effective IPO support. SEBI is also promoting global fund management activities from India. 

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