NSE imposes new eligibility conditions for SME IPOs day after Sebi nod

Changes made just a day after Sebi's decision to tighten norms

The National Stock Exchange (NSE) on Thursday brought into effect stricter eligibility norms for listing of small and medium enterprises (SMEs), just a day after the Securities and Exchange Board of India (SEBI) in principle approved them in a bid to protect the interest of retail investors.

 

“SMEs desirous of listing its securities on NSE Emerge are required to fulfil all additional eligibility criteria in accordance with recent amendments approved by Sebi at its 208th Board Meeting,” NSE said in a circular dated December 20.

 

Usually the norms are brought into force after the market regulator notifies them. But NSE has stepped up and made the norms effective from December 19, although the Sebi norms have got just “in principle” approval and are yet to be notified.

 

“The additional criteria/norms on SME framework will be applicable for all DRHPs filed on or after 19th December 2024 for seeking in principle approval. The other existing criteria put in place by NSE for prudent quality check shall remain unchanged and also be applicable as hitherto,” stated NSE. 

Also Read: SEBI tightens SME IPO norms, mandates a minimum operating profit

 

The market regulator said that the fresh norms will protect the interest of investors by filtering out companies with weaker financials.

 

Under the fresh framework, issuers will be eligible only if they have an operating profit (earnings before interest, depreciation and tax-EBITDA) of Rs 1 crore for any two out of three previous financial years at the time of filing. Further, the offer for sale size by selling shareholders has also been capped at 20 per cent of the total issue.

 

Also SME IPOs where the objective is repayment of loan from promoter or promoter group or any related party from the issue proceeds will not be permitted.

 

Sebi has also granted in-principle nod to streamline several regulations for SMEs to those applicable on companies getting listed on the mainboard.

 

From financial year 2012 to October FY25, around Rs 15,000 crore has been raised by SMEs listed on NSE Emerge by 572 companies. Of these, 140 have migrated to the mainboard.

 

Capital raising through IPOs on NSE’s Emerge platform had registered an all-time high of Rs 1,194 crore in September, but declined to Rs 980 crore in October.