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, use of funds and transparency in the SME IPO segment. The segment has faced allegations of embezzlement and fictitious transactions aimed at manipulating stock prices.

Key propositions in SEBIThe consultation document includes 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 size of the IPO. emission. SEBI also plans to mandate the appointment of a supervisory agency to oversee the use of funds raised through IPOs.

In addition, the regulator plans to increase the minimum number of beneficiaries for a successful IPO from 50 to 200 investors and introducing stricter lock-in requirements for promoters. The minimum promoter contribution (MPC) lock-in will be extended to five years, with gradual releases for assets exceeding the MPC.

SEBI’s proposals also seek to tighten the eligibility criteria for SME registrations. The 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 previous three financial years and fixing a par value minimum of Rs 10 per share.

Draft SME IPO documents, currently reviewed only by stock exchanges, could also face further scrutiny as part of the regulator’s efforts to implement strong checks and balances. With the SME segment walk capitalization exceeding Rs 2,000 billion, SEBI’s measures are aimed at safeguarding the interests of investors and ensuring sustainable growth in this evolving market.

(With inputs from Reuters)