As per Regulation 252 of SEBI ICDR Regulations (2018)

•  Minimum Public Offer
• Every listed company (excluding public sector companies) must offer a minimum public shareholding of at least 25% at the time of IPO.
• The minimum public offer is subject to Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957. 

As per Regulation 253 of SEBI ICDR Regulations (2018)

1. Allocation under book building process in the Net Offer is as follows:
   • Individual Investors (Retail who apply for minimum application size): Not less than 35% of the net offer.
   • Non-Institutional Investors (NIIs): Not less than 15% of the net offer.
   • Qualified Institutional Buyers (QIBs): Not more than 50%, with at least 5% allocated to mutual funds.
   • Any unsubscribed portion in the individual investors or NII category may be reallocated to applicants in other categories.
   • Mutual funds may also be allocated shares from the QIB category beyond the 5% mandatory allocation.
2. Allocation in the NII Category through Book Building Process shall be as follows:
   1. Not less than 1/3 for applicants with application size of than 2 lots and amount not more than 10 lakhs
   2. Not less than 2/3 for applicants with application size of more than 10 lakhs
       
3. Allocation in NII Category in Issue other than Book Building Process
   • Not less than 50% - Individual Investors (Retail)

   • Not less than 50% - Individual applicants other than Individual Investors (Retail) and other investors including corporate bodies or institutions irrespective of specified securities applied for.

As per the Regulation 254 of SEBI ICDR Regulations (2018) following are the Eligible Reserved Categories in IPO

The Issuer may reserve shares from the Issue size (excluding promoters' contribution) for:

• Employees
• Shareholders (other than promoters and promoter group) of listed subsidiaries or listed promoter companies

Exclusions:

• No reservations shall be made for lead managers, registrars, syndicate members, their promoters, directors, employees, or their group/associate companies.

Conditions for Reservations:

Employees-

• Reservation cannot exceed 5% of post-issue capital.
• No employee can receive an allotment exceeding ₹2 lakhs.
• In case of under-subscription, allotment can be made beyond ₹2 lakhs, but not exceeding ₹5 lakhs.

Shareholders-

• Reservation cannot exceed 10% of the Issue size.

Restrictions-

• Persons receiving reservations (except employees and retail shareholders) cannot apply for additional shares in the net offer.

Handling of Unsubscribed Portions-

• Any unsubscribed portion in a reserved category may be reallocated to another reserved category.
• If there is still an under-subscription, the balance is added to the net offer.

Application Limits-

• Applicants in reserved categories can apply for any number of shares, but not exceeding the reserved portion for that category.
   

 As per Regulation 260 of SEBI ICDR Regulations (2018)

Underwriting conditions in a SME IPO

• Full Underwriting-The Initial Public Offer (SME IPO) must be 100% underwritten and cannot be limited to just the minimum subscription level.
• Lead Managers' Obligation-Lead managers must underwrite at least 15% of the Issue size on their own account.
• Appointment of Underwriters-The Issuer (in consultation with merchant bankers) shall appoint SEBI-registered merchant bankers or stock brokers to act as underwriters.
• Subscription Commitment-Lead managers may enter into agreements with nominated investors for subscribing to shares in case of under-subscription.
• Disclosure Requirements-Lead managers must file an undertaking with SEBI confirming that the issue has been 100% underwritten, along with a list of underwriters, investors, and sub-underwriters, one day before the Issue opens.
• Obligations in Case of Default-If an underwriter or a nominated investor fails to fulfil their obligations, the lead managers must cover the shortfall.
• Underwriters’ Participation in the Issue-Underwriters, except lead managers and nominated investors, cannot subscribe to the Issue other than fulfilling their underwriting obligations.
• Disclosure in Offer Document-All underwriting and subscription arrangements must be disclosed in the offer document.

As per Regulation 261 of SEBI ICDR Regulations (2018)

Market Making conditions in SME IPO

• Mandatory Market Making- The lead manager(s) must ensure compulsory market making through registered stock brokers on the SME exchange for a minimum period of three years from the date 
• Market Maker Agreements- Issuers and lead managers may enter into agreements with nominated investors for market making, subject to SME exchange approval.
• Disclosure Requirements- Market making arrangements must be disclosed in the DRHP (offer document).
• Trading Mechanism- Shares bought/sold during market making can be transferred between nominated investors and the market maker. Market makers must hold at least 5% of the listed securities as inventory at the time of allotment for listing on NSE Emerge or BSE SME.
• Minimum Trading Lot- Market makers must buy entire holdings of shareholders in one lot if the value is below the SME exchange’s minimum trading lot. Market makers cannot sell shares in lots smaller than the minimum trading size.
• Restrictions on Promoters-Market makers cannot buy shares from promoters or their group during the market-making period. Promoters’ shares cannot be offered for market making. However, the promoters holding which is not locked in can be traded with prior permission of the SME Exchange.
• Lead Manager’s Role in Governance-Lead managers may be represented on the Issuer's board of directors based on an agreement with the Issuer and lead manager who have the responsibility of market making.

As per Regulation 262 of SEBI ICDR Regulations (2018)

Requirements of Monitoring Agency in SME IPO as per recent SEBI ICDR Amendments

• It is mandatory to appoint a Monitoring agency for Issue size greater than Rs 100 crores excluding the offer for sale by selling shareholders. However, this requirement does not apply to Issue made by banks, public financial institutions, or insurance companies.
• A monitoring agency is a Credit Rating Agency registered with the Securities and Exchange Board of India (SEBI) that governs and monitors the utilization of proceeds from an Issue. It ensures that the funds raised through the Issue are used as intended and reports its findings to the Issuer. 
• The monitoring agency has to submit a quarterly report to the Issuer as per format specified in Schedule XI until the IPO proceeds are fully utilised.
• The board of directors and the management of the Issuer shall provide their comments on findings of the monitoring agency. 
• The Issuer has to publicise the report of the monitoring agency within 45 days from the end of each quarter on its website as well as submit to the stock exchange on which equity shares are listed.
• If appointment of Monitoring Agency is not compulsory the Issuer has to submit a certificate of the statutory auditor for utilisation of IPO Funds along with Quarterly filing of Financial results. This report is required till the funds are fully utilised by the Issuer.
• In cases where one of the objects of the IPO is a working capital requirement and the amount for such object is more than Rs. 5 crores, the Issuer has to submit a certificate of the statutory auditor for utilisation of IPO Funds along with Quarterly filing of Financial results. This report is required till the funds for this particular object are fully utilised by the Issuer.

As per Regulation 263 of SEBI ICDR Regulations (2018)

All public communications, publicity materials, advertisements, and research reports must follow the rules in Schedule IX. 

Pre-Issue Advertisement

As per Regulation 264 of SEBI ICDR Regulations (2018)

• On filing of RHP (Prospectus) with the Registrar of Companies, the Issuer must publish a pre-issue advertisement in the same publications that were used in at the time of DRHP advertisement.
• The pre Issue and the price band advertisement shall be in the format along-with the disclosures as specified in Part A of schedule X.
• If the Issuer has not made any disclosure of price band in the RHP, the Issuer shall announce the price band at least two working days before the opening of Issue in the newspapers in which pre Issue advertisements are released.
• During the subscription period, advertisements must not suggest full subscription, oversubscription, or investor responses.
• Announcements regarding Issue closure can only be made once the lead manager verifies that at least 90% of the offer is subscribed and obtains a certificate from the Registrar (RTA) to the Issue. Provided that such announcements shall not be made before the Issue closure date. Early announcements are permitted only in prescribed formats.

Opening of the Issue

As per Regulation 265 of SEBI ICDR Regulations (2018)

• The IPO open date is at least after three working days from the date of filing the RHP with the Registrar of Companies.

Subscription Period

As per Regulation 266 of SEBI ICDR Regulations (2018)

• The subscription period must be at least 3 working days and not more than 10 working days.
• If the price band is revised, the bidding period must be extended by at least 3 additional working days.
• In case of force majeure events (e.g., banking strike), the period may be extended by at least 1 working day. The reasons shall be recorded in writing.

Application and Minimum Application Value

As per Regulation 267 of SEBI ICDR Regulations (2018)

• A person cannot apply for more securities than the total available in the public category.
• Non-institutional investors (NII) cannot apply for more than the remaining securities after those reserved for qualified institutional buyers (QIB).
• The minimum application size shall be 2 lots and the minimum application size shall be above 2 lakhs.
• Applications must be made in multiples of lot size.
• At least 25% of the Issue Price must be paid per security at application.
• In an offer for sale (OFS), the full Issue price must be paid on application.

Explanation: “Minimum application value” refers to the Issue price of securities and not the payable amount at the application stage.

Minimum IPO Subscription Requirement

• For SME IPOs, the Issue must be 100% underwritten and not limited to just the minimum subscription level.

Post-Issue Advertisement

According to Regulation 270, the lead manager(s) must ensure an advertisement is published within 10 days of key post-issue activities, including:

• Subscription details
• Basis of allotment
• Application statistics (number, value, percentage)
• Refund details
• Credit of securities
• Listing application status

This advertisement must appear in one English, one Hindi, and one regional language newspaper and be uploaded to the stock exchange’s website.

Issuance Conditions and Procedure

As per Regulation 268 of SEBI ICDR Regulations (2018): Allotment procedure and basis of allotment

• The Issuer should not make an allotment to a public Issue if there are less than 200 allottees (Investors) in the SME IPO.
• The Allotment to investors other than individual investors who apply for minimum application size, NIIs and anchor investors, shares are allotted on a proportionate basis within their category.
  • The number of shares is rounded off to the nearest whole number, ensuring the minimum allotment size is maintained as per the offer document.
  • Except for employees, any investor applying under reserved categories cannot receive shares worth more than ₹2 lakhs (in value).
• The allotment of specified securities to each NII shall not be less than the minimum application size in the NII category, and the remaining shares shall be allotted on a proportionate basis.

As per Regulation 269 of SEBI ICDR Regulations (2018):

• After the closure of the IPO, RTA (Registrar) has the role and responsibility for the allotment of shares. In case of oversubscription and non-allotment the application money is refunded as per the time specified by the Board. The investors who do not get any allotment, generally the money is refunded in 24-48 hours (in case of ASBA) after IPO closing date.
  
  
  
• The BRLM along-with RTA must ensure that:
  • Shares are credited in Demat accounts of investors.
  • Refunds or unblocking of funds are done electronically.
    
    
    
• If shares are not allotted or funds are not refunded/unblocked within the specified time:
  • The company must pay 15% annual interest on the delayed amount.
  • This must be done within the time mentioned in the offer document.

However, it shall be noted that the time specified for refund shall vary as per each IPO and the investors can refer RHP of an IPO to check the refund dates.

As per Regulation 270 of SEBI ICDR Regulations (2018):

• The lead managers must publish an advertisement within 10 days after completion of various IPO activities. This advertisement must be published at the place of the registered office of the Issuer at least in the following publications.
  • One English national daily newspaper with wide circulation.
  • One Hindi national daily newspaper with wide circulation.
  • One regional daily newspaper in the language of the company's registered office location.

• The advertisement must include details such as:
  • Subscription details (number, value, and percentage of all applications, including ASBA).
  • Basis of allotment (how shares were distributed among investors).
  • Number and percentage of successful applicants for all applications, including ASBA.
  • Date of refund initiation or instructions sent to banks for refund processing.
  • Date of credit of shares to investors' demat accounts.
  • Date of IPO listing application submission to the stock exchange.
  • These details must also be published on the stock exchange website for transparency.

As per Regulation 271 of SEBI ICDR Regulations (2018):

• The responsibility of Merchant banker shall continue until the completion of the Issue process and for any related matters afterward.
• The Merchant banker must regularly monitor and ensure that all investor grievances related to the Issue are addressed.
• The lead manager(s) must coordinate with the registrars and intermediaries to:
  • Track the flow of applications from banks and syndicate members.
  • Oversee processing of applications, including ASBA forms.
  • Ensure finalization of allotment, credit of shares to demat accounts, and refund/unblocking of funds.
  • Confirm that securities are listed as required.
• If the lead manager(s) notice any act of omission or commission with intermediaries, they must report it to the Board.
• In case of devolvement on underwriters, the lead manager(s) must issue a notice outlining the obligations of underwriters within 10 days of the Issue closure.
• For undersubscribed, underwritten issues, the lead manager(s) must report any underwriters who fail to meet their commitments to the Board in the prescribed format of Schedule XVIII.

As per Regulation 272 of SEBI ICDR Regulations (2018):

• The lead manager(s) must confirm to the bankers handling the Issue that all listing and trading approvals are completed.
  • Once confirmed, the banker can release the funds to the company.
  • If the Issue fails, the banker must refund the money to investors
• If the Issuer fails to get listing or trading approval, from designated stock exchanges it must refund all collected money within four days of receiving rejection from the stock exchange.
  • If the refund is not made within four days, the Issuer and its responsible directors will be jointly liable to repay the money.
  • They must also pay interest at 15% per annum from the fifth day onward.
• The lead manager(s) must ensure that the funds raised in the Issue are released to the company as per Section 40(3) of the Companies Act, 2013.

However, it shall be noted that the time specified for refund shall vary as per each IPO and the investors can refer RHP of an IPO to check the refund dates. In case there is a SEBI enquiry and the IPO listing is delayed due to such enquiry, the application money would be refunded as per the directions of SEBI.

As per Regulation 273 of SEBI ICDR Regulations (2018):

• The lead manager must submit a final post-issue report as per Schedule XVII (Part A) along-with a due diligence certificate in the format specified in Form F of Schedule V (it includes certificate wrt non transferability for locked in shares of promoter after listing)
  • within 7 days after the finalization of the basis of allotment
  • within 7 days of refund of money in case of Issue failure

As per Regulation 274 of SEBI ICDR Regulations (2018):

Reporting of transactions of the promoters and promoter group and other pre-IPO transactions

• The Issuer shall ensure that all transactions done by promoter and promoters group between the date of filing of Draft offer document or offer document and date of closure of issue, all shall be reported to designated stock exchanges (BSE SME or NSE Emerge) within 24 hours of such transactions.
• The Issuer shall also ensure that any proposed pre-IPO placement disclosed in the draft offer document shall be reported to the stock exchange(s), within twenty-four hours of such pre-IPO transactions.

As per Regulation 277 of SEBI ICDR Regulations (2018):

• An SME-listed company with a post-issue paid up capital between ₹10 crores and ₹25 crores can migrate to the Main Board of the stock exchange if:
• Shareholders approve the migration by passing a special resolution through a postal ballot.
  • The company meets the listing eligibility criteria set by the Main Board.
  • The resolution is valid only if the votes cast by shareholders other than promoters in favor are at least twice the votes cast by non-promoter shareholders against the proposal.

As per Regulation 278 of SEBI ICDR Regulations (2018):

An Issuer shall be restricted for the Further Issue of Securities during the period between date of filing DRHP and Listing by way of public Issue, Preferential Issue, QIB, Bonus shares expect by way of ESOS, or a stock appreciation right scheme or refund of application monies unless full disclosures regarding the total number of specified securities or amount proposed to be raised from such further issue are made in such draft offer document or offer document, as the case may be.

As per Regulation 280 of SEBI ICDR Regulations (2018):

Alteration of rights of holders of specified securities and Regulation related to Migration to Mainboard:

1. The Issuer shall not alter the terms of specified securities if it adversely impacts the interest of the holders, unless they have written consent from at least 3/4 of the security holders or a special resolution is passed at a meeting of such shareholders.
2. If an Issuer on SME Exchange is likely to increase its post Issue paid up capital beyond Rs. 25 crores through further Issue of capital, it is required to fulfill the Eligibility criteria set by the Mainboard.
   Provided that no further Issue of capital shall be made by Issuer unless,

• A special resolution approving the migration has been passed by the shareholders through postal ballot. 
• The votes cast in favor of the Migration, by shareholders excluding promoters in favor, must be at least two times the number of votes casted by shareholders against the Migration.
• The Issuer is required to obtain In principle approval from the Mainboard for the listing of its entire specified securities. 
• However, SEBI also allows further Issuance of Capital by listed SME beyond paid up capital Rs. 25 crores without migration to mainboard. In such a case it has to comply with SEBI LODR Regulations, 2015.

As per Regulation 281 of SEBI ICDR Regulations (2018):

• An issuer listed on a SME exchange making a further issue of capital, may do so by adhering to applicable requirements mentioned in these regulations.

As per Amendment Regulation 281A of SEBI ICDR Regulations (2018):

Post-listing exit opportunity for dissenting shareholders

• In case there is any change or variation in the objects of the Issue as mentioned in the offer document an exit opportunity shall be provided to dissenting shareholders.
• Provided that the exit offer shall not apply where there are neither any identifiable promoters nor any shareholders in control of the issuer.