SEBI tightened SME-IPO rules
New Delhi| Market regulator SEBI approved a strict regulatory framework to strengthen the IPO process of small and medium enterprises (SMEs). Under this, SMEs planning to launch an IPO (initial public offering) are required to have an operating profit of at least Rs 1 crore in two out of the last three financial years at the time of filing the Draft Red Herring Prospectus (DRHP). Needed. Its objective is to address concerns related to transparency, management and misuse of funds in the rapidly growing SME segment.
The Board of Securities and Exchange Board of India (SEBI) has approved several measures to strengthen the SME IPO (initial public offering) market, improve the quality of listings and protect the interests of investors. Under this, SME companies will not be able to use the money raised from IPOs to repay loans taken from promoters, directors and related parties. Also, shareholders of the company will not be able to sell more than 50 per cent of their stake during the IPO period.
SEBI said, shareholders in SME IPOs will be able to sell only a maximum of 20 per cent of the total issue size through Offer for Sale (OFS). In addition, companies must make the DRHP available for public comments for 21 days. For easy access to DRHP, QR code will also have to be issued along with publication in newspapers about it.
The market regulator has also decided to change investment banking norms as part of the reforms. Additionally, several reforms have also been approved to promote ease of doing business for debenture trustees, ESG rating providers, InvITs, REITs and SM REITs.
