Sebi tightens norms for SME IPOs

Market regulator introduces a new profitability criterion, puts cap sale of shares through OFS

- ENS ECONOMIC BUREAU @ Mumbai

AS expected, the Securities and Exchange Board of India (Sebi) has tightened the regulations governing Initial Public Offerings (IPOs) for Small and Medium Enterprises (SMEs).

In its Board meeting on Wednesday, the capital market regulator introduced profitability requirements as well as put a cap on shares to be sold through the offer for sale (OFS) route.

SMEs will now be required to have an operating profit of at least ₹1 crore for two out of the last three financial years before filing their DRHP. Also, the OFS size should not be more than 20% of the total issue size. Additionally, these shareholders can't sell more than 50% of their total holding through the IPO.