Markets regulator Sebi has proposed sweeping changes to the SME IPO framework, including lowering the minimum application size to ₹1 lakh, increasing the minimum number of allottees and revising profitability and migration norms.
New Delhi, October 14 — The Securities and Exchange Board of India (Sebi) has proposed a comprehensive overhaul of the SME IPO framework aimed at strengthening investor protection, improving market access and aligning parts of the SME platform with main-board requirements.
One of the key proposals is to reduce the minimum application value for SME IPOs to ₹1 lakh from ₹2 lakh. Under the proposed framework, an application would consist of four lots, with each lot carrying a minimum value of ₹25,000. Subsequent applications would be made in multiples of the applicable lot size.
Sebi has also proposed increasing the minimum number of allottees to 500 from the current 200, while retaining the provision that retail individual investors should receive at least one minimum lot, subject to availability.
The regulator has suggested scrapping the compulsory market-making requirement for SME-listed companies, bringing the framework closer to the main-board structure where such a requirement is not mandatory.
A major change has also been proposed for migration from the SME platform to the main board. Under the proposed market-capitalisation framework, voluntary migration would be allowed for companies valued between ₹1,000 crore and ₹4,000 crore, subject to eligibility conditions.
Companies with a market capitalisation above ₹4,000 crore would be required to migrate to the main board, again subject to meeting the prescribed conditions.
On profitability, Sebi has proposed raising the required average annual operating profit to ₹3 crore over three years, replacing the current condition of ₹1 crore in at least two of the preceding three years.
An alternative route would also be available for issuers that do not meet the profitability requirement, provided at least 75% of the issue is allocated to qualified institutional buyers. If that allocation is not achieved, the entire subscription amount would need to be refunded.
Sebi has further proposed making the trading lot one share for securities listed on the SME platform, replacing the existing price-band-based lot-size system. The move is intended to improve trading flexibility and accessibility in the secondary market.
For book-built SME issues, the regulator has proposed that the upper end of the price band should be at least 105% of the floor price, while retaining the existing maximum cap of 120%.
The regulator has also proposed retaining SME-specific safeguards. General corporate purposes would remain capped at 15% of the amount raised, while the offer-for-sale portion would be limited to 20% of the total issue size. Shares offered by a selling shareholder would also remain capped at 50% of their pre-issue holding, subject to specified exemptions.
As of July 31, 2026, 1,496 entities had listed on the SME platform since inception, including those later migrated to the main board, collectively raising ₹40,222 crore.
Sebi has invited public comments on the proposed changes until November 4, 2026.
