Sebi tightens SME IPO rules, limits promoter OFS to 20%
initial public offerings (IPO) of small and medium enterprises, and tweaked the framework for merchant bankers and custodians by raising their minimum net-worth requirements.
The board of the capital-markets regulator 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.
«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 ₹1 crore from operations for any two out of three financial years immediately preceding the filing of the application.
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, Sebi said, 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.
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