Sebi SME IPO Guidelines: The IPO frenzy is back on D-street as nine public issues opened for subscription between May 26 and May 30. The public issues saw decent demand during their respective bidding windows, indicating investor interest in the primary market. Notably six out of the nine public issues which opened for subscription earlier this week were SME IPOs. As SME IPOs garner significant investor interest on D-street, the market regulator is reportedly considering revamping the existing norms that govern market makers for SME IPOs.
Market makers help SMEs in providing liquidity for shares which have recently made their D-street debut. A report by Moneycontrol cited sources who disclosed that the Sebi along with other market stakeholders is considering a revamp of the networth criteria for market makers similar to the one which is applicable to market makers for mainboard issues.
Presently, market makers for mainboard issues are required to have a minimum networth of Rs 1 crore.
"The discussion is if the networth criteria can be fixed in a range of Rs 1 crore to Rs 5 crore. The limit to handle the SME IPOs for market making will depend on this networth criterion. The higher the networth, the higher the number of IPOs they will be allowed to handle," the report said citing sources.
On the other hand, the market regulator is also considering revamping norms related to the imposition of penalties on market makers for not taking up market-making activities. The penalty is increased for each inactive day in which they do not undertake market activity in the stock. Notably market makers are appointed by merchant bankers as per their choice.
"The penalty structure is also being discussed. If the market makers don't give a quote on the SME stock, they are penalised by the exchange, so a review of that is also being discussed," the report said citing sources
According to the report, the market regulator has received complaints related to SME issues. Earlier in March 2025, the market regulator also put in place more stringent norms for SME IPOs such as a mandatory profitability clause, wherein only profitable SME companies will be able to file draft papers, along with a tightening of the Offer for Sale (OFS) limits for promoters in order to ensure they stay invested in the scrip once it lists.
After the imposition of the OFS limits, promoters can only have an offer-for-sale component of 20 per cent of the issue size. On the other hand selling shareholders have been mandated to offload less than 50 per cent of their shareholding. Other measures included promoter lock-ins for SME IPOs and norms to regulate how SMEs utilise the money raised via the IPOs.
