NSE tightens eligibility norms for SME IPOs on day SEBI announces new rules

A day after market regulator Securities and Exchange Board of India (Sebi) came out with strict SME IPO rules, the National Stock Exchange (NSE) on Friday implemented stricter eligibility criteria for SME companies seeking to be listed on its NSE Emerge platform.

“SMEs desiring to list their securities on NSE Emerge are required to fulfill all additional eligibility criteria as per recent amendments approved by SEBI in its 208th Board Meeting dated 18th December 2024 SEBI (ICDR) Regulations, 2018 and SEBI (LODR) Regulations, 2015. ,” said a circular issued by NSE today.

“The above additional criteria/criteria on the SME Framework will be applicable for obtaining in-principle approval for all DRHPs filed on or after 19th December 2024. Other existing criteria laid down by NSE for prudential quality checks will remain in place and will also be applicable. Till now this Will be applicable till further orders,” the circular added.

Sebi on Wednesday (December 18) approved a proposal to limit offer for sale (OFS) by promoters in small and medium enterprises (SME) IPOs to 20% of the issue size. He also stated that he cannot sell more than 50% of his holding in the IPO.

This decision was taken in the board meeting held on this day.

“To strengthen the framework for public issues by small and medium enterprises and to enable SMEs with a sound track record to raise funds from the public and get listed on stock exchanges and to protect the interests of investors. SMEs, the Board approved amendments to the SEBI (ICDR) Regulations. has given,” the regulator said in a statement issued late on Wednesday. It said that small companies will be eligible for IPO only if they have a turnover of Rs. 1 crore in operating profit.

Under the new rules, those SME issues will also not be allowed where the objective of the issue includes repayment of loans from the promoter or promoter group from the issue process, which aligns the objective of the issue with the deployment of funds raised in the IPO.

The regulator has proposed capping SME public offerings at 15% of the amount raised for general corporate purposes or ₹10 crore, whichever is lower.

The change in rules comes in the wake of cases of diversion of issue amount to shell companies controlled by promoters and revenue inflation through circular transactions by related parties.

As of October 15 in the current financial year, 159 SMEs have raised Rs. 5,700 crore has been raised. However, FY24 saw the highest number of SME public issues, with 196 companies collectively raising Rs. had tapped the market to raise over Rs 6,000 crore.

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