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SEBI has tightened the rules for SME IPO, now investors' interests will not be tampered with
SEBI has tightened the rules for the IPO of Small and Medium Enterprises (SME). Now an operating profit of ₹ 1 crore in at least two years will be mandatory for IPO. Promoters will be able to sell only a maximum of 20% of the IPO. Selling shareholders will not be able to sell more than 50% stake. SEBI has increased the minimum application size to two lots so that small investors get more protection.
The rules for Small and Medium Enterprises (SME) IPO have been made stricter by Capital Market Regulator SEBI. Now the promoters cannot sell up to 20% of the total SME IPO under Offer for Sale (OFS). Apart from this, selling shareholders will no longer be able to sell up to 50% of their current stake.
It will henceforth be mandatory for SMEs to prove at least an operating profit of ₹1 crore for at least two of the last three financial years in order to go for an IPO. It will discourage companies that try to raise money from the market in the absence of stable profits.
SEBI has made the decision to synchronize the allotment process for non-institutional investors (NIIs) in SME IPOs with the main market. It will be more transparent in nature and will provide equal opportunities for the investors.
