August 22, 2026: The Securities and Exchange Board of India (SEBI ) Plans is preparing a comprehensive review of the rules governing Small and Medium Enterprise (SME) initial public offerings, as the regulator looks at concerns around rising costs, underwriting practices and trading activity on SME platforms.
Author: Aditya Pareek | EQMint | IPO News
SEBI Chairman Tuhin Kanta Pandey said the regulator is working on a broad review of the framework governing SME IPOs, according to the newspaper report.
The review comes as India’s SME capital market has expanded rapidly, bringing more smaller companies to public markets while also raising questions about the costs and structure of SME listings.
SEBI Working Group Has Submitted Its Report
A working group constituted by SEBI plans to examine issues related to the SME platform has recently submitted its report to the regulator.
Pandey said SEBI will subsequently come out with a consultation paper on the SME platform, allowing stakeholders to provide feedback on the proposed changes.
The review is expected to examine several aspects of the SME IPO framework, including the underwriting system, trading structure and costs associated with listing on the SME platform.
Underwriting System Comes Under Review
One area receiving attention is the existing underwriting mechanism for SME IPOs.
According to the report, Pandey said the underwriting system needs attention because it isn’t working effectively, while companies can end up bearing significant costs.
The cost structure of SME listings is generally higher than that of mainboard listings, creating an additional burden for smaller companies seeking access to public capital.
SEBI plans review could therefore look at whether the existing framework is delivering the intended benefits while keeping the cost of going public manageable for smaller businesses.
Higher Lot Sizes Haven’t Achieved the Intended Purpose
SEBI is also looking at changes made to trading lot sizes and application sizes for SME IPOs.
Pandey said increasing the trading lot size and application size hasn’t achieved the intended purpose.
The changes were introduced as part of efforts to improve the functioning of the SME market and its investor structure. The regulator’s latest review suggests that the impact of these measures hasn’t fully matched expectations.
The upcoming consultation process could provide more clarity on whether these requirements should be retained, modified or replaced.
SEBI Looking at Global Fund Management From India
The regulator is also examining India’s portfolio management services regulations in the context of growing global fund management activity from the country.
According to the report, changes to the portfolio management services framework could enable trading activity from offshore locations.
This forms part of SEBI’s broader work around India’s capital-market infrastructure and its ability to support financial-market activity connected to global investors and fund managers.
Separate Action Over Sensex Manipulation
The newspaper report also carried a separate SEBI action involving alleged manipulation of the Sensex during the closing auction session (CAS).
SEBI has barred Copthall Mauritius Investment and Mansi Share and Stock Broking from accessing the securities market over allegations that the entities manipulated the Sensex on August 13, an expiry day, to benefit from their derivatives positions.
According to SEBI’s surveillance mechanism, sharp and unusual movements were detected in the Sensex during the CAS.
The regulator observed 3 sharp movements during the session, with changes of 362.02 points, 132.67 points and 405.08 points. These movements occurred within periods ranging from 2 to 28 seconds, according to the report.
SEBI alleged that the trading activity of the 2 entities was aimed at influencing the index’s closing value and generating wrongful gains from their expiry-day Sensex option positions.
What the SME IPO Review Could Mean on SEBI Plans
The SME segment has become an important route for smaller businesses seeking capital from public markets. Any changes to the framework could therefore affect companies planning SME listings, existing listed SMEs, investors and intermediaries.
For companies, the cost of raising capital will remain a major consideration. For investors, the structure of trading, application sizes and market liquidity can influence participation and risk.
SEBI’s consultation paper will be an important next step because it should provide greater detail on the regulator’s proposed changes and the issues identified by the working group.
The regulator’s latest comments point to a broader examination of how the SME market operates, from IPO underwriting and listing costs to trading structures and investor participation.
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Disclaimer: This article is not an investment advice and is for educational purpose only.
