Sebi Bolsters SME IPO Regulations and Investment Banking Norms

Sebi's board approved new regulatory frameworks to enhance SME public issues. The measures include operational profitability criteria for SMEs launching IPOs, as well as reforms for Debenture Trustees, ESG rating providers, and others. The updated guidelines aim to aid SME growth and safeguard investors.

The Securities and Exchange Board of India (Sebi) has taken decisive action to fortify the regulatory landscape surrounding public issues by small and medium enterprises (SMEs). In a critical move, the board greenlit a more stringent framework focused on enhancing scrutiny and ensuring the robustness of SME public offerings.

Integral to Sebi's strategy, the board also endorsed reforms designed to streamline operations and enhance the ease of business for Debenture Trustees, ESG rating providers, InvITs, REITs, and SM REITs. This suite of reforms seeks to create a more inviting business environment while maintaining rigorous standards.

A key component of the new guidelines stipulates that SMEs intending to launch an initial public offering (IPO) must exhibit operating profits, defined as earnings before interest, depreciation, and tax (EBITDA), reaching at least Rs 1 crore in two of the three years preceding their Draft Red Herring Prospectus (DRHP) filing. This measure aims to bolster investor confidence and provide SMEs with a sturdy platform for public investment.

(With inputs from agencies.)