“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 dated 18th December 2024 to the SEBI (ICDR) Regulations, 2018 and SEBI (LODR) Regulations, 2015,” NSE circular issued today, said.
“The above 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 & also be applicable as hitherto. This shall be applicable till further orders,” the circular said further.
Sebi had on Wednesday (December 18), approved a proposal to limit the offer for sale (OFS) by promoters in small and medium enterprises (SME) IPOs to 20% of an issue size. It also said they cannot sell more than 50% of their holding in an IPO.
The decision was taken at its board meeting held on this day.
“In order to strengthen the framework for public issues by small and medium enterprises and to facilitate that SMEs with a sound track record have an opportunity to raise funds from the public and get listed on stock exchanges, and to protect the interests of investors in the SMEs, the board approved amendments to the SEBI (ICDR) Regulations,” the regulator said in a statement issued late Wednesday. It said that smaller firms would be eligible for an IPO only if they have operating profits of Rs 1 crore from operations for any two out of three financial years immediately preceding the filing of the application.Under the new rules, those SME issues would also not be allowed where objects of the issue consist of repayment of loan from promoter or promoter group from the issue proceeds, aligning the issue objective with deployment of the funds garnered in the IPO.The regulator has also proposed to cap the amount for general corporate purposes in SME public offerings at 15% of the amount being raised, or ₹10 crore, whichever is lower.
The change of rules comes in the wake of instances of diversion of issue proceeds to shell companies controlled by promoters and inflation of revenue by circular transactions through related parties.
In the current financial year until October 15, 159 SMEs have raised more than Rs 5,700 crore through IPOs. However, FY24 witnessed the highest number of SME public issues, with 196 firms tapping the market to mobilise more than Rs 6,000 crore collectively.
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