SEBI Plans Stricter Regulations For SME Listings Amid Platform Misuse Concerns

New Delhi, May 15 (KNN) India's market regulator, the Securities and Exchange Board of India (SEBI), is planning to implement stricter regulations for public share offerings by small and medium enterprises (SMEs) later this year, according to sources familiar with the matter.

The move comes after complaints of misuse of the dedicated SME listing platform introduced in 2012 to facilitate capital raising by smaller businesses.

The forthcoming rules, to be issued after consultations with stakeholders, are expected to raise the minimum size of SME public offerings to between 300 million and 500 million Indian rupees (USD 3.59 million-USD 5.99 million).

Currently, there is no prescribed minimum issue size, though listed SMEs must maintain a post-issue capital base of at least 250 million rupees.

“A minimum offer size will ensure that serious companies are accessing the capital markets and in turn safeguard the interest of investors,” stated one of the sources, who requested anonymity as they were not authorised to speak publicly.

In addition to introducing a size threshold, the new guidelines will likely require enhanced disclosures from issuers and merchant bankers regarding use of proceeds, issuer financials, and risk factors. Regulators aim to promote transparency and deter misrepresentation.

The imminent reforms follow a surge in SME public offerings during the 2023-24 financial year, with 205 companies raising 60 billion rupees compared to 125 firms raising 22 billion rupees the previous year. However, some of these highly oversubscribed issues raised red flags of potential platform abuse.

Last week, SEBI barred three SME firms from capital markets for misusing funds raised through public offerings. SEBI Chairperson Madhabi Puri Buch had earlier cautioned against misuse of the SME listing framework and noted complaints of price manipulation.

(KNN Bureau)