Introduction- Listing on primary markets is one of the medium of fund raise by the companies seeking growth and expansion. A company can bring IPO on either mainboard or SME platform of the stock exchanges of India. SEBI has issued ICDR Regulations that prescribes the eligibility requirements and regulations for IPO. Here, we have explained the various regulations and listing requirements for SME IPO. This Ebook covers all amendments made in SEBI ICDR Regulations dated 3rd March 2025.

As per the Regulation 229 of SEBI ICDR Regulations (2018):

1. An Issuer is eligible for SME initial public offering (IPO) only if its post-Issuer paid-up capital is less than or equal to Rs 10 crores.
2. An Issuer with a post-Issue paid up capital more than Rs 10 crores and upto Rs 25 crores can issue specified securities.
3. An Issuer company can bring an initial public offer (IPO) when it meets the track record and other eligibility criteria of the SME Exchange of BSE and NSE as mentioned below.
   • If the Issuer was previously a partnership firm or a limited liability partnership (LLP), its track record of operating profit will be considered under certain conditions.
   • The Financial statements of the partnership or LLP for the relevant period must follow the format prescribed for companies under the Companies Act, 2013 and comply with the below requirements: 
     • Adequate disclosures are made in the financial statements as required to be made by the Issuer as per Schedule III of the Companies Act, 2013;
     • The financial statements must be certified by auditors who have undergone the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold a valid certificate from the ICAI Peer Review Board.
   • In cases where a proprietorship firm, Partnership firm, Limited Liability Partnerships(LLP) which has been converted to a company can be eligible for IPO only if the company post conversion  has been in existence for at least one full financial year before filing DRHP.
     
     Also the Restated Financial statements after conversion to a Company should be as per Schedule III of Companies act, 2013.
      
   • In case of any complete change in the Promoters or there are new promoters acquiring more than 50% of the shareholding of the Issuer, DRHP can be after completing one year from the Date of such changes.

   • For eligibility purposes minimum operating profits (EBITDA) of at least Rs 1 crore are required for at least 2 out of the 3 previous financial years.

Criteria for New Listing

The stock exchanges of India have specified IPO Eligibility Requirements for listing purposes on SME platforms of India. SME companies can list on NSE Emerge or BSE SME on meeting the BSE SME IPO Eligibility criteria and NSE SME IPO Eligibility Criteria as highlighted below.

FCFE Eligibility for NSE Emerge:

It states that Free Cash Flow to Equity (FCFE) for at least 2 out of 3 Financial Year.

Other Mandatory Requirements to be fulfilled as per Recent Amendments in the SEBI ICDR for IPO and listing purposes:  

As per the Regulation 230 of SEBI ICDR Regulations (2018)

1. An Issuer for initial public offer (IPO) shall ensure that:
   • The Issuer has applied to one or more SME exchanges for listing its securities and selected one as the designated stock exchange as per Schedule XIX. (this schedule specifies that the Issuer desirous of listing shall execute listing agreement with such a stock exchange). It is to be noted that the listing agreement is made at the time of filing RHP.
   • It has an agreement with a depository to dematerialize its existing and proposed securities.
   • All partly paid-up equity shares have been either fully paid or forfeited.
   • All securities held by promoters are in dematerialized form.
   • In case a project which forms part of objects of Issue and the project is partially funded by Banks and Financial Institutions the details regarding sanction letter (from such bank or FI) is required to be disclosed in the Draft offer document and offer document.
   • Offer for Sale cannot exceed 20% of the total Issue size.
   • Offer for sale shall not exceed 50% of pre Issue shareholding.
   • Restriction on repayment on loan from promoter, promoter group or any related party from IPO Funds.
      

2. The amount for General Corporate Purposes, as mentioned in objects of the Issue in the draft offer document and the offer document shall not exceed 15% or Rs 10 crore, whichever is lower of the amount raised by the Issuer. The amount year marked for GCP can be used for  Brand building, Marketing activities and Hiring human resources.

3. Further, the aggregate amount for General Corporate Purposes (GCP) and Unidentified acquisition shall not exceed 25% of the amount raised by the Issuer.

Regulation 228 of SEBI ICDR (2018) has specified entities which are not eligible for Initial Public Offer (IPO):

1. The Issuer, its promoters, promoter group, directors, or selling shareholders are currently debarred from accessing the capital market by the Board.
2. Any promoter or director of the Issuer is also a promoter or director of another company that is debarred from accessing the capital market by the Board.The Issuer or any of its promoters or 
3. directors who are wilful defaulters or fraudulent borrowers.
4.  Any promoter or director is a fugitive economic offender.

Note: These restrictions do not apply if the debarred mentioned in (a) or (b) has already expired by the time the draft offer document is filed with the SME Exchange.