The National Stock Exchange (NSE) has tightened listing requirements for small and medium-sized enterprises (SMEs) on its Emerge platform. This follows new regulations from the Securities and Exchange Board of India (Sebi).

At a time when there has been a surge in public issues on Indian stock exchanges, market regulator SEBI has revised IPO (initial public offerings) rules for small and medium enterprises in a bid to safeguard investor interest and curb malpractices.

Sebi has introduced stricter regulations for SME IPOs, mandating a minimum operating profit and limiting selling shareholders' divestment to 50% of th

Sebi has tightened SME IPO norms, mandating a minimum operating profit and restricting selling shareholders' offloading to 50%. These measures aim to enhance transparency and prevent fund misuse, boosting investor confidence in the booming SME segment amidst concerns over governance and manipulation.

The board of the capital markets regulator, which met here in Mumbai today, approved a slew of changes for the SME IPO segment, which has been under the regulatory scanner for quite some time now.

Moin Ladha, Partner at Khaitan & Co, expressed the view that the recent changes are positive developments. He highlighted that the listing rules for the main board have also evolved over time.

SME IPOs will also be prohibited from using proceeds to repay loans from promoters, promoter groups, or related parties.

The board of the capital-markets regulator approved a proposal to limit the offer for sale (OFS) by promoters in small and medium enterprises (SME) IPOs to 20% of an issue size. It also said they cannot sell more than 50% of their holding in an IPO.

The net worth requirements for merchant bankers have been hiked to Rs 50 crore, with merchant bankers with Rs 10-crore net worth won’t be allowed to handle mainboard IPOs.

Under the new regulations, companies seeking to launch an IPO in the SME segment will need to meet certain profitability thresholds. SEBI has made it mandatory for firms to have earned at least ₹1 crore in profit from operations in the last 2-3 financial years,

The biggest measures pertain to SMEs, with new rules aiming to shield vulnerable investors, while ensuring that these companies themselves are on solid financial ground.