SEBI proposes market-cap based eligibility for SME IPOs
Why in the news
The Securities and Exchange Board of India (SEBI) issued a consultation paper on 14 October 2026 proposing a revamp of SME IPO rules. Public comments are invited until 4 November 2026.
Key facts
- Market-cap test: eligibility would be based on market capitalisation instead of paid-up capital.
- Mandatory SME listing: companies with post-issue market cap up to ₹1,000 crore.
- Optional SME listing: companies above ₹1,000 crore and up to ₹4,000 crore, with restated Ind AS financials.
- Alternative route: firms failing the profit test may still list through book-building if at least 75% of the net offer goes to QIBs.
- Lock-in: pre-issue capital of non-promoters would be locked in for six months instead of one year.
| Item | Current | Proposed |
|---|---|---|
| Profitability | ₹1 crore operating profit in two of three years | Average ₹3 crore a year over three years |
| Minimum application | ₹2 lakh | ₹1 lakh (each lot at least ₹25,000) |
| Trading lot | Larger than one share | One share |
| General corporate purposes | 15% of issue or ₹10 crore cap | 15% of issue; ₹10 crore cap removed |
About the SME platform
The SME platforms of stock exchanges let small and medium enterprises raise equity. Since inception, they have mobilised ₹40,222 crore, and 365 companies had moved to the main board as of 31 July 2026.
Exam angle
- Thresholds: ₹1,000 crore (mandatory) and ₹4,000 crore (optional upper limit).
- Minimum application halved to ₹1 lakh, meaning at least four lots of ₹25,000.
- SEBI is the capital market regulator; a consultation paper is a draft, not a final rule.