Sebi may revamp rules for SME IPOs, Custodians
Securities and Exchange Board of India (Sebi) is likely to discuss a number of proposals including revamping rules for initial public offerings of small and medium enterprises, changes to the framework for custodians such as doubling their minimum net worth to ₹100 crore from the current requirement of ₹50 crore and expanding the ambit of unpublished price-sensitive information. The Sebi board is scheduled to meet on December 18.
The board will consider whether to raise the minimum application size for the public offerings of small and medium(SMEs) to ₹2 lakh or even higher at ₹4 lakh from the existing ₹1 lakh. The proposed tightening 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.
The regulator has suggested that smaller firms would be eligible for an IPO only if the issue size is over ₹10 crore and have an operating profit of ₹3 crore from operations for at least any two out of three financial years preceding the application. Further, it recommended limiting offer for sale by promoters to 20% of the issue size and disclosure of merchant bankers fees in the prospectus.
In the current financial year till October 15, 159 SMEs have raised more than ₹5,700 crore through IPOs. In FY24, there was the highest number of SME public issue with 196 firms tapping the market to mobilise over ₹6,000 crore.
The Sebi board will discuss revised rules for custodians as some of them such as
