India Business Journal - SEBI tightens SME listing norms, bars IPOs to repay loans to promoters’ entities

INDUSTRY

SEBI tightens SME listing norms, bars IPOs to repay loans to promoters’ entities

IBJ Bureau
Dec 19, 2024

The Securities and Exchange Board of India (SEBI) has tightened regulatory framework for SME IPOs to allow only those entities that have an operating profit in at least two of the previous three years. The markets regulator has barred companies from raising funds to repay loans to promoters’ entities.

The board of the capital markets regulator, which met in Mumbai on Wednesday, approved a slew of changes for the SME IPO segment, which has been under the regulatory scanner for quite some time now.

“In order to strengthen the framework for public issues by small and medium enterprises (SMEs) and to facilitate that SMEs with a sound track record have an opportunity to raise funds from the public and get listed on stock exchanges and to protect the interests of investors in the SMEs, the board approved amendments to the SEBI (ICDR) Regulations, 2018, and SEBI (LODR) Regulations, 2015,” a release issued by the SEBI stated on Wednesday.

“SME issues shall not be permitted where objects of the issue consist of repayment of loan from promoter, promoter group or any related party from the issue proceeds whether directly or indirectly,” it added.