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The Tax Publishers SEBI--SME IPO SME IPOs--Overview of the Legal Framework CS. Amit Baxi Small and Medium Enterprises (SMEs) play a pivotal role in the Indian economy by contributing significantly to employment, innovation, and exports. To facilitate their access to capital markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have established dedicated SME platforms. These platforms, governed by the Securities and Exchange Board of India (SEBI), enable SMEs to raise equity capital through Initial Public Offerings (IPOs). This write up is an exploration of the legal requirements, processes, and other aspects of SME IPOs in India. 1. SEBI Guidelines The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, provide a comprehensive framework for SME IPOs. Key provisions include: (a) Eligibility Criteria -- The post-issue paid-up capital of the company must not exceed Rs. 25 crore. -- The company must comply with all the prescribed disclosure and due diligence requirements. -- Minimum net worth and profitability norms, if applicable, must be met. (b) Minimum Public Shareholding -- SMEs must adhere to SEBI's requirement of a minimum public shareholding of 25%. (c) Offer Document -- The offer document must include detailed disclosures, such as business operations, financial performance, promoter background, and risk factors. These documents require SEBI's review and approval before public issuance. (d) Minimum Application Size -- The minimum application size for investors is Rs. 1 lakh. 2. BSE -SME Platform- Eligibility for Listing The BSE SME platform offers an ecosystem tailored for SMEs. To list, companies must satisfy the following: (a) Incorporation and Track Record -- The company must be incorporated under the Companies Act. -- A track record of at least three years is preferred, though exceptions may exist for startups with high growth potential. (b) Financial Norms -- Positive net worth and distributable profits for two of the last three financial years are mandatory. (c) Promoter Contribution -- Promoters must contribute at least 20% of the post-issue capital. (d) Minimum Public Offering -- At least 50 investors are required for the IPO. (e) Appointment of Merchant Banker -- An SME seeking to list must appoint a merchant banker as the lead manager for the IPO. 3. NSE Emerge Platform- Eligibility for Listing SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

SEBI--SME IPO

SME IPOs--Overview of the Legal Framework

CS. Amit Baxi

Small and Medium Enterprises (SMEs) play a pivotal role in the Indian economy by contributing significantly to employment, innovation, and exports. To facilitate their access to capital markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have established dedicated SME platforms. These platforms, governed by the Securities and Exchange Board of India (SEBI), enable SMEs to raise equity capital through Initial Public Offerings (IPOs). This write up is an exploration of the legal requirements, processes, and other aspects of SME IPOs in India.

1. SEBI Guidelines

The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, provide a comprehensive framework for SME IPOs. Key provisions include:

(a) Eligibility Criteria

-- The post-issue paid-up capital of the company must not exceed Rs. 25 crore.

-- The company must comply with all the prescribed disclosure and due diligence requirements.

-- Minimum net worth and profitability norms, if applicable, must be met.

(b) Minimum Public Shareholding

-- SMEs must adhere to SEBI's requirement of a minimum public shareholding of 25%.

-- The offer document must include detailed disclosures, such as business operations, financial performance, promoter background, and risk factors. These documents require SEBI's review and approval before public issuance.

(d) Minimum Application Size

-- The minimum application size for investors is Rs. 1 lakh.

2. BSE -SME Platform- Eligibility for Listing

The BSE SME platform offers an ecosystem tailored for SMEs. To list, companies must satisfy the following:

(a) Incorporation and Track Record

-- The company must be incorporated under the Companies Act.

-- A track record of at least three years is preferred, though exceptions may exist for startups with high growth potential.

(b) Financial Norms

-- Positive net worth and distributable profits for two of the last three financial years are mandatory.

-- Promoters must contribute at least 20% of the post-issue capital.

(d) Minimum Public Offering

-- At least 50 investors are required for the IPO.

(e) Appointment of Merchant Banker

-- An SME seeking to list must appoint a merchant banker as the lead manager for the IPO.

3. NSE Emerge Platform- Eligibility for Listing