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Informist, Wednesday, Dec. 18, 2024

 

--SEBI OKs tightening of IPO, listing norms for SME segment

--SEBI: SME IPO only if co has EBITDA over INR 10 mln in 2 of last 3 FYs

--SEBI extends related party deal norms for main board cos to SMEs

 

NEW DELHI – The Securities and Exchange Board of India has decided to tighten the norms for companies coming out with public issues in the small and medium enterprises segment of stock exchanges and for companies already listed on that segment. The SEBI board, which met Wednesday, approved a few changes to the norms that will result in strengthening the regulatory framework for the SME segment.

 

An SME issuer shall bring out an initial public offering only if it has an operating profit, or earnings before interest, tax, and depreciation, of INR 10 million for any two of three previous financial years at the time of filing the draft red herring prospectus. If the IPO includes an offer for sale by selling shareholders, the offer for sale part will not exceed 20% of the total issue size and selling shareholders cannot sell more than 50% of their holding.

 

Further, only 50% of an SME issuer's promoter holding held in excess of minimum promoter contribution will be permitted to be released after one year and the remaining 50% holding can be released only after two years. SEBI also said that the allocation methodology for non-institutional investors in SME IPOs will be the same as that for this category of investors in main board IPOs.

 

The market regulator has also decided to cut the proportion of IPO funds used for general corporate purposes to 10% from 25% of the amount raised, or INR 100 million, whichever is lower. This is aimed at mitigating the risk of misuse of issue proceeds. Further, no SME issue will be permitted if the object of the issue is to repay a loan from the promoter group or any related party, whether directly or indirectly, SEBI said.

 

The market regulator is extending the related party transaction norms as applicable to listed companies on the main board of stock exchanges to SME segment companies. This is, however, subject to the related party deal threshold being at least 10% of the annual consolidated turnover or INR 500 million, whichever is lower.  End

 

Reported by Rajesh Gajra

Edited by Avishek Dutta

 

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