Author: Nishtha Mehrotra | EQMint

Synopsis

• SEBI has proposed a comprehensive overhaul of India’s SME IPO framework, including market capitalization-based eligibility criteria.
• The proposals include a ₹3 crore average annual operating profit requirement and a reduction in the minimum IPO application size to ₹1 lakh.
• Public comments are invited until 4 November 2026, with the proposals yet to become final regulations.

The Securities and Exchange Board of India (SEBI) has proposed a major overhaul of India’s small and medium enterprise (SME) initial public offering (IPO) framework, introducing changes to listing eligibility, profitability requirements and investor participation.

In a consultation paper dated 14 October 2026, the regulator proposed replacing paid-up capital-based eligibility criteria with post-issue market capitalization thresholds. Companies valued at up to ₹1,000 crore would be required to list on the SME platform, while those valued between ₹1,000 crore and ₹4,000 crore could opt for it, subject to specified conditions.

SEBI has proposed raising the minimum average operating profit requirement to ₹3 crore annually over the preceding three financial years. The minimum IPO application size would fall to ₹1 lakh from above ₹2 lakh, potentially widening investor access.

Other proposals include permitting single-share trading lots after listing, removing mandatory market-making and full-underwriting requirements, and removing the ₹10 crore cap on general corporate purpose expenditure while retaining the 15% limit.

The regulator has also proposed a separate offer-for-sale framework, including a one-year holding period for specified shares offered through it.

Public comments are invited until 4 November 2026. The proposals are not yet in force, and existing regulations continue to apply until amendments are notified.

Sources: SEBI | Business Standard

Disclaimer: This article is for information purposes only and is not investment advice.

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