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Dreaming of launching an SME IPO but not sure if you meet the exchange eligibility criteria, we have the solution for you. Read this guide on SME IPO eligibility criteria to understand the listing requirements set by BSE SME and NSE Emerge for paid-up capital, net worth, profitability, and more.
SME entrepreneurs who wish to list their business on the stock exchange must first understand the eligibility criteria or norms for SME IPOs.
As we all know, the BSE and the NSE have dedicated platforms for SME listings, the BSE SME and the NSE Emerge (NSE SME). Both exchanges have set different regulatory requirements for SME IPO Listing.
To get listed on an SME exchange, you need to know all the exchange requirements for issuing SME IPOs in India.
Listing criteria for SME IPOs are the regulatory standards or conditions set by the SME exchange in order for your SME to be listed on the SME exchange.
In this regard, SMEs need to fulfill certain key requirements such as the company’s post-issue paid-up capital, financial track record or profitability, operating history, net tangible assets, and more.
Any SME or Indian start-up company that fulfills the conditions set by the stock exchange can go public through an SME IPO.
Here are the listing norms, requirements, or issuance criteria for listing on the BSE SME or NSE SME platform. Both the exchanges have some similarities and differences in terms of SME listing.
BSE SME is the dedicated exchange for listing of SME securities on the BSE. Any SME wishing to list on the BSE SME platform must fulfill the criteria listed below.
In November 2023, the BSE revised its criteria for listing new SME IPOs on the BSE SME on or after January 1, 2024.
| BSE SME IPO listing Requirements | |
| Incorporation | SMEs incorporated under the Indian Companies Act 1956 can go public through an SME IPO. |
| Post-issue paid-up capital | The issuer entity’s post-issue paid-up capital at face value should not be above Rs 25 crores. |
| Net worth | The IPO issuing entity must have a net worth of atleast Rs 1 crore for 2 preceding financial years. Earlier, SMEs who had positive net worth after accumulated losses were able to issue their SME IPO on BSE but now, the minimum net worth required is Rs 1 crore. |
| Net Tangible Assets | The company’s minimum net tangible asset must be Rs 3 crore in the last full financial year, which was earlier Rs 1.5 Crore. |
| Company Age or operating history | Regardless of whether SME is a public limited or private limited company, it has must completed operating history of at least 3 years. Thus, the firm must have an established track record of at least 3 years. If in case, it has not yet completed 3 years of operations then the project for which the company is looking to issue an IPO should be funded by NABARD, SIDBI, Banks (other than cooperative banks), and other financial institutions. SMEs seeking listing must have an operational track record for at least one full financial year and audited financials for one full year. |
| Earnings before interest, tax & depreciation (EBITDA) | SMEs going public must have positive EBITDA or cash accruals or earnings before interest, tax, and depreciation in 2 out of the last 3 financial years. Along with that, an applicant firm must report positive EBITDA for the immediately preceding full financial year before the application date. |
| Leverage Ratio | SMEs should not be heavily financed through debt, in this respect, BSE has put a restriction on a maximum leverage ratio of not more than 3:1. Finance companies have been provided with relaxation as they have no restrictions on leverage ratio. |
| Disciplinary requirements |
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| No Default | There is no default in payment of principal and interest of bonds or debentures or fixed deposit holders by the company, its subsidiaries or promoters. |
| SMEs with new name | If in the last 1 year, the entity has changed its name, then it is mandatory to earn atleast 50% of the last year's revenue from business activities or operations undertaken under the new name. Here, revenues should be on restated or consolidated basis. |
| Other requirements |
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Spot the differences in the old and new eligibility criteria for listing SMEs on the BSE SME segment.
| BSE SME IPO Current Criteria | BSE SME IPO New Eligibility Criteria | |
| Net Worth | Positive Net worth | Minimum Rs 1 crore in any 2 of last 3 full financial years |
| When SME is converted in new name | No requirement | Previous firm requires a net worth of Rs 1 crore in 2 preceding full financial years |
| Net Tangible Assets | Current required net tangible assets is Rs 1.5 crore | From 1st April 24, SMEs must have a net tangible assets of Rs 3 crore or above. |
| Track record | 3 years of minimum track record. If not, the company must be funded by banks, central government, state government, financial institutions, etc. must have a positive net profit. |
As per the latest guidelines, SMEs must be in existence of 3 years. When not in existence from the past 3 years, the project for which company is proposing to issue IPO must be funded by NABARD, SIDBI, Banks, and/or financial institutions. |
| Leverage ratio | Not required | It should not be more than 3:1, finance companies have exemption. |
| Default in repayment of loan | Not required | SME should not default in payment of loan and interest thereon. |
| Change in company's name | Not required | If SME has changed its name in last 1 year, atleast 50% of business revenue should be in the new name. |
| Disciplinary action | Not required | No regulatory action must be taken against promoters or directors and not been suspended from trading activities. |
In addition to the above norms for SME listings, brokerage firms wishing to be listed on the SME platform must fulfill the following conditions to be listed on the BSE SME Exchange.
Want to list your SME on the NSE Emerge platform. Here are the key critieria to be met while applying for the SME IPO to the exchange.
| NSE SME IPO Requirements | ||
| Incorporation | SMEs desiring to list on the NSE Emerge platform pursuant to IPO must be incorporated under the Companies Act 1956 /2013 in India. | |
| Post-issue paid-up capital | The applicant company's post-issue paid-up capital shall not exceed Rs 25 crore. | |
| Net worth | It is mandatory for the company to have a positive net worth. | |
| Operating Profit | Issuing entity must have distributable operating profits for at least 2 years out of the preceding 3 financial years excluding extraordinary items. | |
| Company's operating history | Company must have 3 years of existence or a minimum of 3 years of track record is mandatory for SMEs seeking shares listing on the NSE SME listing exchange. | |
| Promoters Holding | Promoters individually or collectively with a minimum of 3 years of experience in the same line of business shall hold at least 20% of the company's post-issue equity share capital. | |
| Additional Requirements i.e., no regulatory violation, no winding-up petition, etc. |
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SEBI has also issued certain guidelines for SMEs to be listed on the BSE or NSE Emerge.
SEBI has laid down criteria for listing SME IPOs relating to a minimum number of shareholders, the minimum number of subscribers for SME IPOs, trading of SME shares in lots, market making, etc.
Unlike mainboard IPOs, where companies have to adhere to strict issuance criteria, the market regulator SEBI has laid down relaxed norms for SME IPO issuance and listing.
Any SME desirous to be listed on the SME Exchange must comply with the requirements of the exchange as well as the listing norms laid down by SEBI.
SEBI requirements for listing of SME IPOs
Getting listed on the SME platform requires SMEs to meet the exchange eligibility criteria, norms, or requirements. It allows SMEs to raise required funds for their growth enable investors to invest in small and mid-sized growing companies at an early stage.
Are you planning your SME IPO, if yes, feel free to contact us, Fill out below SME IPO Enquiry form and our team will get back to you soon.
Are you an SME company looking for an IPO to raise funds and get listed in the stock market? We can help. Contact us today... SME IPO Enquiry Form
No, only a public limited company that is incorporated under the companies act 1956 or 2013 in India is eligible to raise capital through SME IPO. Hindu Undivided Family (HUF) and Limited Liability Partnership (LLP) desirous to list securities on the SME platform must be converted into a public company to be eligible to issue equity shares to the public.
Any small and medium size entity who meets the following conditions is able to issue its SME IPO.
There is no condition regarding the net tangible assets to issue an SME IPO to list securities on the NSE SME platform. However, an SME proposing to list shares on the BSE SME segment must have net tangible assets worth Rs 3 crore.
Yes, as per the BSE circular in April 2017, Stock or commodity Broking companies and Micro Finance companies are eligible to get listed on the SME platform of BSE provided that they meet the eligibility criteria.
BSE SME Eligibility criteria for broking companies
Listing on SME exchange either BSE SME or NSE Emerge has several conditions or prerequisites.
Whether an SME Company is a sole proprietorship, partnership, or public or private company, it is mandatory to satisfy the key criteria while filling SME IPO application to exchange.
Unlike main board IPOs, SME IPOs have a certain set of additional requirements regarding underwriting, market making, etc. to be eligible to issue an IPO. The additional compliance requirements for SMEs listing are as follows:
No, a newly incorporated company cannot issue SME IPO. The eligibility criteria of the SME exchange at BSE and NSE require an SME to have atleast 3 years of operating history to launch SME IPO in the market. A newly incorporated SME who has not yet completed 3 years since its incorporation is not eligible to offer shares to the public via IPO.
Eligible SMEs can issue their IPO and become listed SME companies whose shares are traded on the SME exchange either BSE SME or NSE SME.
BSE SME IPO Financial Requirements
Yes, having operating profit is the key requirement for SMEs listing on the exchange. Thus, loss-making companies in the last few years is not eligible to issue SME IPOs.
Both the SME platforms i.e., NSE Emerge and BSE SME’s eligibility norms stated that an SME that wants to become a listed company must have operating profit in any 2 of the last 3 preceding financial years.
There is no minimum operating profit criteria for SME IPOs.
BSE and NSE Emerge have some differences in the eligibility criteria relevant to net worth, net tangible assets, leverage ratio, etc. to launch an SME IPO in India.
| Basis | Listing on BSE SME | Listing on NSE SME |
| SME's Leverage ratio | SME owners who want to list their company on the BSE SME platform should not have a leverage ratio above 3:1 | There is no such requirements to list an SME company on the NSE Emerge. |
| Net worth | SME requires a net worth of at least Rs 1 crore for 2 preceding full financial years before filing the application to list on BSE SME. | SMEs who have positive net worth in any 2 of the last 3 financial years can get listed on the NSE SME platform. |
| Net Tangible Assets | SMEs should have net tangible assets of atleast Rs 3 crore to list on BSE SME segment. | No minimum requirements of net tangible assets. |
| Promoters Holding | No criteria | It is necessary for the SME to have at least 20% shares held by promoters. |
