SEBI has issued a consultation paper on SME IPO. Under this, the listing framework of small and medium companies has been reviewed. SEBI has proposed in the paper to increase the minimum limit of subscription for the issue. Apart from this, it has also been proposed to fix the limit of offer for sale. In view of the increasing participation of investors in SME IPO, very high subscription and high returns, SEBI had already indicated to tighten the rules of the framework.

What is special in the proposals? It

has been proposed in the consultation paper that the minimum size of application in SME IPO should be increased from Rs 1 lakh to Rs 2 lakh. Apart from this, SEBI has proposed that the method of allotment of shares to non-institutional investors should be changed and allotment on the basis of ratio in NII category should be abolished and draw of lots should be started as is applicable in retail category. Apart from this, it has been proposed in the consultation paper that the part of Offer for Sale in SME IPO should be limited to 20 percent of the issue size. Regarding the number of allotment recipients, SEBI has also proposed that the number of allotment recipients in SME public issue should be at least 200. Along with this, SEBI has announced more strict rules regarding the use of funds received in issues of more than Rs 20 crore. Why is SEBI tightening the rules? In the SEBI paper, it was emphasized that with the increase in SME issues in the recent past, the participation of investors is also increasing. The number of applications was 4 times in FY20 as compared to the investors getting allotment, it increased to 46 times in FY20, while in FY24 it increased to 245 times. The amount raised through SME issues from January till now in calendar year 2024 has reached record levels. During this period, more than 200 SME issues have raised more than Rs 7 thousand crore. The amount raised in the entire year of 2023 was less than Rs 4700 crore.