Share market: This is a bit disturbing news for the industrialists who are planning to raise money from the share market to expand their small scale industries. Before understanding the ways of the share market, they will have to take a close look at their accounts. They can approach the share market only after earning a profit of Rs 1 crore in at least two of the last three years. The stock exchanges will also give the green signal to SMEs for IPO only after testing them on this criterion. SEBI has tightened the rules and has put guards at various places on the way of small scale industries to the stock exchange. 

Offer for sale cannot be more than 20%

As per the decision taken by the SEBI board on Wednesday, the offer for sale to be sold by the shareholder in the SME IPO will not exceed 20 percent. Similarly, the shareholder cannot sell more than 50 percent of his share holdings. The new initiative taken by market regulator SEBI aims to allow only reliable and financially strong companies to IPO. To maintain stability in the stock market and protect the interests of investors, SEBI has decided that the money raised from the IPO will not be used to repay the loans of promoters, directors and their related parties. The SEBI board has also tightened many provisions related to the interpretation of Unpublished Price Sensitive Information (UPSI). SME promoters will have to work hard to meet this criterion.

Environmental and social parameters will also have to be met

SME IPOs will have to meet not only financial but also ESG (Environmental and Social Governance) standards. A study conducted by SEBI has found that while preparing the draft for IPO, SMEs only resort to Jugaad to meet the legal aspects. They do not respect the basic spirit of the law.