SEBI (Securities and Exchange Board of India) tightened the SME (Small Business Enterprise) listing regulations on Wednesday, Dec 18, 2024. It also approved an overhaul of investment banking regulations and expanded the definition of UPSI (unpublished price-sensitive information). In addition to that, it gave the green signal to reforms, making it easier for Debenture Trustees, REITs, InvITs, and ESG rating providers to do business.
The market regulator raised eligibility criteria to ensure only businesses with good track records raise funds and get listed. It stated, “An issuer shall make an IPO only if the issuer has an operating profit (earnings before interest, depreciation, and tax) of Rs 1 crore from operations for any 2 of the 3 previous financial years at the time of filling of its draft red herring prospectus (DRHP).”
SEBI further limited OFS (offer for sale), which now should not exceed 20% of the total issue. Selling shareholders cannot sell more than 50% of their holdings under SEBI’s new regulations.
Apart from new regulations for SMEs, the board approved expanding UPSI’s scope to add 17 out of 27 items that were not considered material events. Some of them include papers related to restructuring plans, proposed fundraising activities, agreements impacting management control, one-time bank settlements, changes in KMP (Key Managerial Personnel), etc.
Another major decision by SEBI on Wednesday was to review merchant banker regulations regarding eligibility, activities they can engage in, and net worth. The board also set a limit for merchant bankers at 20 times their liquid net worth.
