SME listings to undergo changes, AIBI to review eligibility, framework- QHN

The committee will review thresholds such as the minimum net worth, net tangible assets, and performance history, and minimum assets under management for financial firms

The listing framework for small and medium enterprises (SME) may undergo changes after a review undertaken by a committee constituted by the Association of Investment Bankers of India (AIBI), amid concerns over inflated subscriptions, a growing number of listings and volatility in the stock prices, sources privy to the development said on Wednesday.

“It has now been more than 10 years since the SME platform has been active. It is time to review the entire framework and make suggestions so that amendments can be made which bring impact on the ground level,” said the sources.

“A good demand is a positive signal for the SME IPO. To avoid inflated subscriptions or non-genuine subscriptions, several steps have already been taken — like removal of non-funded applications,” they added.

The committee will review the thresholds such as the minimum net worth, net tangible assets and performance history and minimum assets under management for financial firms. Emailed queries sent to Sebi, AIBI, National Stock Exchange (NSE), and BSE remained unanswered.

As per the National Stock Exchange (NSE) website, an SME planning to get listed on the Emerge platform must have a net worth of at least Rs 1 crore for the preceding two financial years, have a post-issue paid-up capital of not more than Rs 25 crore, and net tangible assets of Rs 3 crore. The company must also have a track record of at least three years and have operating profit for two out of three latest financial years preceding the application date.

As per NSE, its SME platform has raised a total capital of Rs 8,289 crore as of December 2023. In the first nine months of FY24, over 100 companies were listed and the fresh capital raised from the platform stood at Rs 3,157 crore — over a five-fold jump from what it was in FY22. There were over 400 companies listed on the platform while 138 have migrated to the main board. 

Last year, the markets regulator extended the short-term additional surveillance measure (ST-ASM) framework to SME stocks to curb manipulation and bring safeguards for investors. The stock exchanges had also revised the guidelines for migrating SMEs to the main board, specifying minimum requirements on public shareholders, net worth, and listing period.

First Published: Jan 31 2024 | 7:19 PM IST