SEBI Sets Stage for SME Platform Revamp to Boost Growth

India’s market regulator, SEBI, plans a comprehensive review to address challenges SMEs face, including trading obstacles and high costs. SEBI aims to revamp the listing framework by issuing a consultation paper addressing key issues like odd lots, market-making inefficiencies, and underwriting challenges. Future reforms seek to enhance growth and efficiency.

The Securities and Exchange Board of India (SEBI) announced plans for a thorough review of the regulatory framework governing small and medium-sized enterprises (SMEs) on the stock exchange. SEBI Chairman Tuhin Kanta Pandey, speaking at the 23rd FICCI Capital Markets Conference in Mumbai, highlighted challenges SMEs face in trading and escalating costs that could impede growth.

One key issue flagged was the creation of odd lots, complicating investor trading in SME shares. Despite increasing trading lot sizes and application sizes aimed at controlling retail participation, these measures have fallen short. SEBI also expressed concerns over the rising costs and inefficiencies in the market-making framework and the underwriting system, which have placed additional financial burdens on SMEs.

Furthermore, SMEs incur higher costs compared to mainboard listings, and migration processes require review. SEBI plans to address these issues with a comprehensive reform proposal via a forthcoming consultation paper, aiming to foster a more conducive environment for SME growth and global fund management activities from India.