SEBI Reviews SME IPO Rules, Proposes Bigger Institutional Role and Stricter Listing Norms

India's markets regulator SEBI is considering changes to the rules for companies raising money through SME public offerings, as per a Reuters news report.  

The proposals include setting aside a larger portion of issues for institutional investors and changing the criteria for companies seeking to list on SME platforms. 

The review follows regulatory concerns over the use of funds raised by some small companies and an investigation into investment banks over high fees and subscription levels in SME initial public offerings. 

Institutional Allocation Proposed 

Under the proposals, up to 50% of an SME public issue could be reserved for qualified institutional buyers. Retail investors could be allocated 35%, while non-institutional investors could receive the remaining 15%. 

Up to 60% of the qualified institutional buyer portion could be reserved for anchor investors, who commit funds before the issue opens for wider subscription. This allocation structure would be similar to that used for mainboard public issues. 

Listing Criteria May Change 

SEBI is also considering changes to the financial requirements for companies listing on SME platforms. One proposal would require companies to report an average profit of at least ₹3 crore over the previous three years. 

The regulator is also examining changes to the size criteria. The existing post-issue capital requirement could be replaced by a post-issue market capitalisation requirement of between ₹100 crore and ₹400 crore. 

Offer for Sale and Trading Rules 

An offer-for-sale framework is also being considered to allow existing shareholders to sell shares during a public issue. The proposal could reduce the lock-in period for pre-IPO shareholders to six months from the current one year. 

SEBI is separately considering allowing shares to trade individually, instead of the current requirement involving lots worth ₹2 lakh. 

SME Fundraising So Far 

Small companies raised $1.2 billion through more than 250 public offerings last year. In 2026 so far, about 100 offerings have raised less than half that amount. Large companies have raised about 17 times more during the same period. 

Companies with paid-up capital of up to ₹100 crore can currently list on SME platforms of the BSE and National Stock Exchange. These platforms have fewer disclosure requirements, and their issues are vetted by the exchanges rather than SEBI. 

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Conclusion 

The proposed changes form part of SEBI’s review of the SME listing framework. The regulator is considering changes across issue allocation, listing eligibility, shareholder exits and trading requirements. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
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