SEBI Proposes Stricter SME IPO Guidelines to Ensure Market Credibility

SEBI has proposed stricter rules for SME IPOs, including raising the minimum application size to limit smaller investor participation, introducing a 'draw of lots' for non-institutional investors, and mandating monitoring agencies for issues above Rs 20 crore to enhance transparency and credibility in the SME segment.

In a bid to ensure informed investor participation and maintain the credibility of the SME segment, India's securities regulator, SEBI, has proposed a slew of stringent guidelines for small and medium-sized enterprise (SME) initial public offerings (IPOs).

The new propositions include raising the minimum application size from Rs 1 lakh to Rs 2 lakh, introducing a 'draw of lots' system for non-institutional investors, and limiting Offer-for-Sale (OFS) to 20% of the issue size.

Further, SEBI seeks public opinion on increasing the minimum application size to Rs 4 lakh and has set stricter criteria for IPO eligibility, as the number of SME IPOs surged to unprecedented levels, raising over Rs 6,000 crore in FY 2023-24.