The Securities and Exchange Board of India (SEBI) has unveiled a comprehensive proposal to revamp listing regulations for small and medium enterprises (SMEs). The reforms aim to address concerns over governance, fund utilization and transparency in the SME IPO segment. The segment has faced allegations of fund diversion and fictitious transactions to manipulate stock prices.
Key proposals in SEBI’s consultation paper include doubling the minimum application value for SME IPOs from Rs 1 lakh to Rs 2 lakh and capping the offer-for-sale (OFS) component at 20% of the issue size. SEBI also plans to mandate the appointment of a monitoring agency to oversee the usage of funds raised through IPOs.
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In addition, the regulator is considering increasing the minimum number of allottees for a successful IPO from 50 to 200 investors and introducing stricter lock-in requirements for promoters. The lock-in on the minimum promoter contribution (MPC) will be extended to five years, with phased releases for holdings exceeding the MPC.
SEBI’s proposals also aim to tighten eligibility criteria for SME listings. Suggested changes include increasing the minimum issue size to Rs 10 crore, requiring a minimum operating profit of Rs 3 crore in two of the three preceding financial years and setting a minimum face value of Rs 10 per share.
The draft IPO documents of SMEs, currently reviewed only by stock exchanges, may also come under greater scrutiny as part of the regulator’s push to implement robust checks and balances. With the SME segment’s market capitalization surpassing Rs 2 trillion, SEBI’s measures seek to safeguard investor interests and ensure sustainable growth in this evolving market.
(With inputs from Reuters)
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