Eligibility: SEBI, BSE SME, NSE Emerge
SEBI sets the floor in ICDR Chapter IX; each exchange adds its own tests. The issuer has to pass both.
| Test | SEBI ICDR (all SME issues) | BSE SME | NSE Emerge |
|---|---|---|---|
| Post-issue paid-up capital (face value) | Up to ₹25 cr for the SME route | Up to ₹25 cr | Up to ₹25 cr |
| Operating profit | EBITDA of at least ₹1 cr from operations in 2 of the 3 preceding years | Positive in 2 of 3 years, plus SEBI's ₹1 cr floor | At least ₹1 cr in 2 of 3 years (NSE calls it EBIT) |
| Net worth | — | At least ₹1 cr in each of the 2 preceding full years | Positive |
| Net tangible assets | — | At least ₹3 cr in the last full year | No separate test published verify |
| Track record | — | 3 years, may include time as a proprietorship, partnership or LLP; at least 1 full audited year as a company | 3 years for the company or its promoters; promoters 3+ years in the same business |
| Leverage | — | Debt to equity no more than 3:1 | No separate test published verify |
| Cash flow | — | — | FCFE positive in 2 of 3 years. From 20 Apr 2026: CFO − capex + equity raised + net borrowings − interest × (1 − t), on restated consolidated figures |
| Promoters | Minimum contribution 20% of post-issue capital | 100% demat; no change in promoters in the last year | At least 20% after the issue |
| Clean record | No debarred promoter or director; no wilful defaulter or fraudulent borrower | No admitted NCLT, winding-up or IBC proceedings; no regulatory suspension; working website | No admitted IBC or winding-up proceedings; no material regulatory action in 3 years |
BSE criteria: notice 20231124-54, for draft offer documents filed from 1 January 2024. NSE criteria from the NSE Emerge eligibility page as on 6 October 2026. Brokers and microfinance companies have extra BSE conditions.
Issue structure rules (ICDR Chapter IX after March 2025)
| Rule | Position now | Before March 2025 |
|---|---|---|
| Offer for sale | At most 20% of the issue size; each selling shareholder at most 50% of their pre-issue holding | No cap |
| General corporate purposes | Lower of 15% of the issue or ₹10 cr (GCP plus unidentified acquisitions still within 35%) | Up to 25% |
| Repaying loans | Proceeds cannot repay loans from promoters, the promoter group or related parties | Allowed |
| Minimum application | 2 lots, worth more than ₹2 lakh | More than ₹1 lakh |
| Minimum allottees | 200 | 50 |
| DRHP | Filed with the exchange, open 21 days for public comments; public announcement within 2 working days | Shorter, less public |
| Monitoring agency | Mandatory above ₹50 cr; below that the statutory auditor certifies use of funds with the results | Above ₹100 cr |
| Non-institutional quota | Main-board method: one-third for applications up to ₹10 lakh, two-thirds above | Single pool |
| Pre-IPO placements | Report to the exchange within 24 hours | — |
| Underwriting | 100% of the issue; merchant banker at least 15% on own account | Unchanged |
| Market making | Compulsory for 3 years from listing; two-way quotes at least 75% of trading time | Unchanged |
Promoter contribution and lock-in
- Minimum promoters' contribution: 20% of post-issue capital, locked in for 3 years.
- Promoter holding above the 20%: 50% released after 1 year and the rest after 2 years. Before March 2025 it was all released after 1 year.
- Other pre-issue shareholders: locked in under the ICDR; check the period applicable to your issue with the lead manager verify.
- Every promoter share must be in demat before filing. Pledged shares need the lead manager's view under the 2026 amendment verify.
Readiness checklist
Most SME IPO delays come from items the company could have closed a year earlier. Work through these before appointing the lead manager.
| Workstream | What has to be in place | Why it matters |
|---|---|---|
| Corporate form | Converted to a public company: special resolution, MGT-14 in 30 days, INC-27 in 15 days, fresh certificate. At least 3 directors and 7 members. | Only a public company can make an IPO. |
| Board and KMP | One-third independent directors registered in the IICA databank; a woman director; MD or WTD, CFO and a whole-time company secretary who will be the compliance officer. | Companies Act listed-company rules and the exchange's board-composition check. |
| Committees and policies | Audit committee, NRC, stakeholders relationship committee, vigil mechanism; LODR and PIT policies drafted and approved. | Disclosed in the DRHP and needed from listing day. |
| Share capital | ISIN for all securities; 100% promoter demat; cap table reconciled to MGT-7, PAS-3 and SH-7 history; ESOPs regularised. | Lock-in and promoter contribution are computed on this. |
| Financials | Three years (plus a stub if needed) restated under ICDR, examined by a peer-reviewed auditor; audit qualifications cleared. | The restated numbers drive every eligibility test. |
| Tax and regulatory | GST returns reconciled across GSTINs, open scrutiny notices answered, TDS defaults cleared, FEMA import and export entries closed in IDPMS and EDPMS. | Every open notice and default becomes an outstanding-litigation or risk-factor disclosure. |
| Creditors | MSME dues paid within 45 days and disclosed; MSME-1 filed. | The offer document discloses outstanding dues to MSMEs and material creditors. |
| Related parties | Transactions documented at arm's length with approvals; loans from promoters not planned for repayment from the issue. | Proceeds cannot repay promoter loans; RPTs are a diligence focus. |
| Legal and assets | Title to key property, licences and approvals; group-company and litigation data. | Material gaps become risk factors or delay in-principle approval. |
Process and timeline
- Readiness work and restatement (often 6 to 12 months for a first-time issuer).
- Appoint the lead manager, registrar, legal counsel and market maker; due diligence.
- File the DRHP with BSE SME or NSE Emerge (not SEBI); 21 days of public comments.
- Exchange observations and in-principle approval.
- RHP or prospectus filed with the RoC; price band announced.
- Anchor allocation (if any), issue opens for at least 3 working days.
- Basis of allotment, listing agreement executed, listing and trading approval; trading starts.
Practitioners quote 4 to 6 months from lead-manager appointment to listing, and total issue costs of roughly 8% to 14% of the issue size. Both are market estimates, not rules.
Migration to the main board
| Test | NSE (from 1 May 2025) | BSE verify |
|---|---|---|
| Time on the SME platform | At least 3 years | At least 3 years |
| Paid-up capital | At least ₹10 cr | At least ₹10 cr |
| Size | Average market cap at least ₹100 cr; revenue above ₹100 cr | Average 6-month market cap ₹100 cr or revenue ₹100 cr in each of 3 years (notice of February 2026, effective 1 March 2026) |
| Profitability | Positive operating profit in 2 of 3 years | EBITDA averaging ₹15 cr, at least ₹10 cr each year |
| Net worth | At least ₹75 cr | At least ₹1 cr each year; net tangible assets ₹3 cr each year |
| Shareholders and liquidity | At least 500 public shareholders | Turnover and trade-count tests |
| Promoters | At least 20% and not below 50% of the holding at listing | At least 20%, all in demat |
| Record | No defaults, NCLT matters or material regulatory action in 3 years; no pending SCORES complaints | 3-year LODR compliance record |
The BSE column comes from secondary reports of the February 2026 notice; confirm on the BSE website before relying on it.
What may change
- SEBI review of SME issue and listing rules proposed: reported options include easing compulsory market making and underwriting and raising the ₹25 cr cap.
- Expert committee on SME capital raising (set up December 2025) proposed.
Items marked verify rest on secondary sources or conflicting reports; check them against the primary text before relying on them. Items marked proposed are not law yet.