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.

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 face value 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.

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.

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

1. An Issuer for initial public offer (IPO) shall ensure that:
2. 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.
3. It has an agreement with a depository to dematerialize its existing and proposed securities.
4. All partly paid-up equity shares have been either fully paid or forfeited.
5. All securities held by promoters are in dematerialized form.

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.