SME IPO rules proposed in a SEBI consultation paper would halve the minimum application size for investors and tighten eligibility requirements for companies seeking to list on India’s small and medium enterprise platforms. The changes are proposals, not enacted rules.
Key Takeaways
- The proposed minimum IPO application would fall from ₹2 lakh to ₹1 lakh.
- SME shares could trade in single-share lots instead of the current price-based lots.
- Issuers would face higher operating-profit and minimum-allottee requirements.
How SME IPO rules would change for investors
The Securities and Exchange Board of India’s consultation paper proposes reducing the minimum application size to ₹1 lakh to improve participation. In March 2025, SEBI raised it from ₹1 lakh to ₹2 lakh to limit participation by smaller retail investors because of the higher risks associated with SME investments.
The paper also proposes reducing the trading lot for SME stocks to one share. Current price-based lots typically range between ₹1 lakh and ₹1.6 lakh. The proposed changes are intended to increase trading activity in SME stocks.
| Item | Details |
|---|---|
| Minimum IPO application | Proposed ₹1 lakh, compared with the current ₹2 lakh. |
| Trading lot | Proposed one share, compared with current price-based lots typically worth ₹1 lakh to ₹1.6 lakh. |
| Operating profit | Proposed average of at least ₹3 crore a year over three years, versus ₹1 crore in two of the preceding three years. |
| Minimum allottees | Proposed 500, compared with the current 200. |
Higher thresholds for companies
The consultation paper proposes requiring an SME issuer to have average operating profit of at least ₹3 crore per year over the preceding three financial years. The existing requirement is ₹1 crore in operating profit in two of those three years.
It also proposes increasing the minimum number of allottees in an SME IPO from 200 to 500. The paper links the proposed investor relaxations to tighter issuer rules intended to protect investors.
Listing framework and market background
The paper also suggests linking the choice of listing platform to post-issue market capitalization rather than post-issue paid-up capital, with mainboard listing for companies valued above ₹4,000 crore. It proposes a separate framework for offers for sale in SME IPOs.
The Bombay Stock Exchange and National Stock Exchange launched their SME platforms in 2012 to help smaller companies access capital markets. Since inception, 1,496 companies have listed on the platforms, raising ₹40,222 crore; almost 90% of those funds have been raised since 2023.
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