Published: October 15, 2026
StartupFeed Quick Take
- SME IPO hopefuls would need an average operating profit of Rs 3 crore a year, up from Rs 1 crore in two of three years.
- Firms that miss the bar can still list if qualified institutional buyers take at least 75% of the net offer.
- The rules are only a proposal. Public comments stay open until November 4, 2026.
SEBI wants SME IPO hopefuls to clear a far higher profit bar, proposing on October 14 an average operating profit of Rs 3 crore a year.
An SME IPO lets a small or medium company sell shares to the public on the BSE SME or NSE Emerge platform, not the mainboard.
The consultation paper would replace today’s test, Rs 1 crore of operating profit in two of the last three financial years.
That bar is barely two years old. It dates to December 2024, and the paper already wants it tripled to a Rs 3 crore average across all three years.
SEBI framed the overhaul as a response to a market that has boomed.
“The SME segment has evolved significantly, with a substantial increase in the number of issuers accessing the platform.”
Securities and Exchange Board of India. From its consultation paper on the SME IPO framework, October 14, 2026.
What Changes in SME IPO Eligibility
The paper rewrites two eligibility tests. The first is the profit a company must show. The second is which platform it may use.
The platform would be decided by a company’s value after the IPO, not by its paid-up capital. A firm worth up to Rs 1,000 crore could list only on the SME platform.
One worth Rs 1,000 crore to Rs 4,000 crore could choose the SME platform or the mainboard. Above Rs 4,000 crore, only the mainboard would be open.
Here is how the main rules would change.
| Rule | Now | Proposed |
|---|---|---|
| Operating profit | Rs 1 crore in 2 of 3 years | Rs 3 crore average over 3 years |
| Listing platform test | Post-issue paid-up capital | Post-issue market value |
| Minimum application | Rs 2 lakh | Rs 1 lakh (four lots of Rs 25,000) |
| Minimum allottees | 200 | 500 |
| Trading lot | Exchange-set lot | One share |
| Market making | Compulsory for 3 years | Removed |
The QIB Route for Firms That Miss the Bar
A company that cannot meet the Rs 3 crore bar would still have one way in. It would have to run a book-built IPO and sell at least 75% of the net offer to qualified institutional buyers, the large funds and banks.
Miss that 75% mark, and the whole issue is cancelled and every rupee refunded.
Under this route, the paper caps retail investors at 10% of the net offer and other large buyers at 15%. The institutional share would not be underwritten.
Selling shareholders face new limits too. Shares put up for sale would carry a one-year holding period first, with some exceptions.
Big institutional sellers normally escape caps that hold an offer for sale to 20% of the issue, and to half their stake. That relief would not apply to the QIB route.
Cheaper, Smaller Bets for Retail Investors
Retail investors would need less money to apply, and more of them would get shares. The minimum application would fall to Rs 1 lakh from Rs 2 lakh, split into at least four lots of Rs 25,000 each.
The number of people who must receive an allotment would rise to 500 from 200.
After listing, SME shares could trade in single units, not fixed lots. The paper found about 5% of individual shareholders held odd lots they could not easily sell.
Two old safeguards would go. The compulsory three-year market-making arrangement would end, and the mandatory full underwriting of an SME issue would go with it.
Why SEBI Is Moving Now
The SME platform has grown too big for its light-touch start. Companies have raised Rs 40,222 crore on it since inception, and 365 have since moved up to the mainboard, on SEBI’s count to July 31, 2026.
The surge has worried SEBI before. In the 2023-24 financial year, 196 SME IPOs raised more than Rs 6,000 crore, and some drew bids worth hundreds of times the shares on offer.
A year later, by mid-October 2024, another 159 SME IPOs had raised over Rs 5,700 crore.
A first profit test arrived in December 2024. This paper goes further. Founders, bankers and investors have until November 4 to send their views.
StartupFeed Insight
The headline is the Rs 3 crore bar, but the real shift is the split screen SEBI is building. Strong, profitable firms clear a tougher test. Loss-making firms with institutional backers get a clean, separate door through the 75% QIB route. That favours venture-funded companies over the thinly profitable ones that crowded the platform. Merchant bankers will read the QIB route as the faster path and steer clients to it. Expect a rush of SME draft prospectus filings under the current, easier rules before any final version takes effect. On SEBI’s usual timeline, that means early 2027.
By Saraswati Chaubey, Writer
What this means for you: If you run a small firm eyeing a BSE SME or NSE Emerge listing, your profit bar is set to triple to Rs 3 crore. Read the paper, model your numbers against the Rs 3 crore average, and send SEBI your comments before the November 4 deadline.
Have a tip? Write to us at editorial@startupfeed.in.
Disclaimer: This article is for information only and is not investment advice. StartupFeed and its authors are not SEBI-registered investment advisors. Please speak to a SEBI-registered advisor before investing.
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