India’s markets regulator is considering applying some rules designed for large companies to public offers by smaller businesses, including a quota for institutional investors ahead of share sales, two sources with direct knowledge of the matter said.
The regulator is also mulling raising the limit on the size of companies that can list on platforms dedicated to small firms and mandating larger operating profit requirements before listing, the sources, who did not want to be named as the discussions are private, said.
The potential change in rules comes after regulatorywarnings about small businesses diverting funds raised from public markets and an investigation into investment banks extracting unusually high fees and juicing subscription numbers. They also echo regional trends as Hong Kong’s exchange questions the need for a junior market.
In India, small businesses with paid-up capital of up to ₹100 crore ($10.5 million) cab list on separate sections of the BSE and National Stock Exchange of India. These have fewer disclosure requirements and offerings are vetted by the exchanges as opposed to large IPOs which have to be cleared by the Securities and Exchange Board of India.
Potential changes
An email query sent to SEBI was not answered. Earlier this month, SEBI chief Tuhin Kanta Pandey had said that the small business listing platform rules were being reviewed.
Going forward, up to 50 per cent of small companies’ share issues could be reserved for qualified institutional buyers, the sources said, with 35 per cent kept aside for retail investors and 15 per cent for non-institutional investors, similar to the case with mainboard companies.
As much as 60 per cent of the qualified institutional portion could be kept aside for anchor investors who commit capital before an offering opens more broadly, they added.
Firms can list on the platforms if they have reported an average profit of at least ₹3 crore ($313,938) over the past three years, as per another proposal, higher than the current threshold of ₹1,000 crore in at least two of the past three years, the sources said.
Moreover, the post issue capital requirement could be replaced by post issue market capitalisation of ₹1,000 crore to ₹4,000 crore, the sources said.
Details of plans on increasing institutional participation in SME IPOs have not been reported previously.
An offer-for-sale framework to allow existing investors to exit during the public offer is also being considered, one of the sources said, in a move that could shorten the lock-in for pre-IPO shareholders to six months from one year.
India is considering allowing trading in single shares against the current requirement of ₹200,000, one of the sources said.
Fresh risks
Small firms raised $1.2 billion through more than 250 offerings last year and have added less than half that amount through about 100 offerings so far in 2026. Large companies have raised about 17 times that amount this year.
Kosturi Ghosh, a partner at Trilegal, says that expanding the platform’s scope could create fresh risks.
“The segment has not exactly been the poster child for governance. Allowing a larger-size company to choose between the SME segment and the main board to play the regulatory arbitrage is a dangerous proposition.”