SEBI issued a consultation paper on 14 October 2026 proposing changes to how small and medium enterprises list through IPOs under the ICDR Regulations, 2018, according to a summary on Corplawupdates. The paper is a proposal only. The regulations have not been amended, and the existing rules apply until final amendments are notified. Comments are due by 4 November 2026.
Eligibility by market capitalisation
The paper would replace the paid-up capital test with bands based on post-issue market capitalisation:
- Up to ₹1,000 crore: the SME Platform only.
- Above ₹1,000 crore and up to ₹4,000 crore: an optional SME route. Issuers not already on Ind AS would give restated consolidated Ind AS financials.
- Above ₹4,000 crore: the Main Board framework.
Profit and investor tests
The paper proposes an average operating profit of at least ₹3 crore a year over the preceding three financial years. The current test is ₹1 crore in at least two of three years. Issuers that fail the profit test could use a book-built route with at least 75% of the net offer allotted to qualified institutional buyers, and if that is not met, all subscription money would be refunded. The minimum application would be four lots of at least ₹25,000 each, or ₹1 lakh, and minimum allottees would rise from 200 to 500.
Offer for sale and lock-ins
An offer for sale would need a one-year holding period, a 20% cap on total issue size and a 50% cap per seller on pre-issue holdings, with qualified institutional buyer sellers generally exempt. Promoters' holding above the minimum would be locked in for one year, and other pre-IPO non-promoter holders for six months, down from one year.
Why SEBI says it is changing the rules
The paper argues that nominal share capital may not reflect an issuer's true size, so the test should follow market value. It gives data as of 31 July 2026: 1,496 entities listed on the SME Platform, including 365 that moved to the Main Board, SME IPOs raising ₹40,222 crore, and a market capitalisation of ₹4,70,984 crore. The summary notes that it should be checked against the SEBI paper.
Key numbers
- Comments due: 4 Nov 2026 (Consultation paper, 14 Oct)
- Profit test: ₹3 cr avg (From ₹1 cr in 2 of 3 years)
- Min application: ₹1 lakh (Four lots of ₹25,000)
- Min allottees: 500 (From 200)
What boards and CFOs should note
Three points stand out for finance teams. First, the proposals are open for comment until 4 November and are not yet rules. Second, the profit test would tighten from ₹1 crore in two of three years to an average of ₹3 crore over three years. Third, the market-cap bands would put issuers above ₹4,000 crore on the Main Board framework instead.
Source: Corplawupdates, October 2026. This is a summary of a news report, published as general information. It is not legal, tax or investment advice.
This article is journalism and commentary. It is not a recommendation to buy or sell any security, and it is not professional advice. Read the full disclaimer.
