SEBI plans easier rules for SME IPO listings
What's the story
India's market regulator, the Securities and Exchange Board of India (SEBI), is considering major changes to its listing rules. The proposed reforms are aimed at encouraging more micro-cap companies to go public and increasing investor participation in these smaller firms. If implemented, these changes would be the largest overhaul of India's small and medium-enterprise (SME) market since dedicated platforms were launched in 2012.
Rule adjustments
Raising paid-up capital limit
The proposed changes would allow companies with a market capitalization of up to ₹4,000 crore ($420 million) to use SME platforms for their initial public offerings (IPOs).
Typically, firms valued at less than ₹5 billion go public on these platforms.
The move comes less than two years after SEBI tightened its grip on the fast-growing micro-IPO space amid concerns over price manipulation and frauds.
Capital and trade
Removing minimum trade size requirements
SEBI is also considering raising the paid-up capital limit for companies looking to list on SME platforms from ₹25 crore to ₹100 crore.
This would give firms valued between ₹1,000 crore and ₹4,000 crore a choice between an SME platform and the mainboard.
The regulator is also mulling over the idea of removing minimum trade size requirements, which would let investors buy/sell shares in smaller quantities.
Existing regulations
Proposed changes to improve liquidity
Under the current rules, bids are required in multiples of ₹200,000, which can be a hurdle for smaller investors.
Market-makers also have to continuously provide buy-and-sell quotes in SME shares to ensure liquidity. However, this increases costs for issuers.
SEBI is planning to remove these conditions as part of its proposed reforms.