Market regulator Securities and Exchange Board of India (SEBI) has proposed a sweeping overhaul of the small and medium enterprise (SME) initial public offering (IPO) framework, seeking to widen investor participation, reduce fundraising costs and strengthen investor safeguards.
In a consultation paper issued on Wednesday, SEBI proposed changes to IPO eligibility, fundraising, share allotment, trading liquidity and migration to the main board. The proposals follow reviews by a working group and an advisory committee.
On August 14, Moneycontrol had reported that SEBI was considering such changes.
Under the proposed framework, eligibility for SME listings would be determined by post-issue market capitalisation instead of paid-up capital. Companies with a post-issue market capitalisation of up to Rs 1,000 crore would have to list on SME platforms, while those valued above Rs 1,000 crore and up to Rs 4,000 crore could choose between SME and main-board listings, subject to additional financial reporting requirements.
SEBI has proposed raising the average annual operating profit requirement to Rs 3 crore over three years, replacing the existing requirement of Rs 1 crore in at least two of the three years. Companies that do not meet the profitability criteria could still raise funds through book-building, provided at least 75 per cent of the issue is allocated to qualified institutional buyers (QIBs). If this threshold is not met, the issue would have to be fully refunded.