SEBI's consultation paper of 14 October 2026 proposes that eligibility for an SME IPO should depend on post-issue market capitalisation instead of post-issue paid-up capital. Issuers up to ₹1,000 crore would use only the SME Platform, and those above ₹1,000 crore and up to ₹4,000 crore could choose it, if they report under Ind AS. Comments are invited by 4 November 2026.
- Eligibility test would change from post-issue paid-up capital (₹10 crore / ₹25 crore) to post-issue market capitalisation
- Up to ₹1,000 crore: SME Platform only; above ₹1,000 crore and up to ₹4,000 crore: SME Platform optional
- Optional-band issuers must present restated consolidated Ind AS financials for three financial years and any stub period
- Market cap is tested again at the Red Herring Prospectus or Prospectus stage, and the issuer may have to re-file
- This is a proposal only. Comments are due by 4 November 2026
What changes
Regulation 229 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) now sets SME IPO eligibility by post-issue paid-up capital. SEBI proposes to use post-issue market capitalisation instead, calculated at the offer price.
- Up to ₹1,000 crore: the issuer would access only the SME Platform.
- Above ₹1,000 crore and up to ₹4,000 crore: the issuer may also access the SME Platform. If it has not adopted Ind AS, it must present restated consolidated financial statements under Ind AS for the last three financial years and the stub period, if any.
Re-filing if market cap moves
Eligibility set when the draft offer document is filed would be checked again when the Red Herring Prospectus (book-built issue) or Prospectus (fixed price issue) is filed.
- Main Board draft, but estimated market cap falls to ₹1,000 crore or below: the issuer must re-file under the SME framework.
- SME draft, and market cap rises above ₹1,000 crore: the issuer may continue under the SME framework, up to ₹4,000 crore.
- SME draft, and market cap exceeds ₹4,000 crore: the issuer must re-file under the Main Board framework.
Who it applies to
Companies planning an IPO on the SME Platform or the Main Board, and their promoters, CFOs and merchant bankers. Companies already listed on the SME Platform are not covered by this eligibility proposal.
Key dates
- Issued: 14 October 2026
- Comments due by: 4 November 2026
- Effective date: none yet, as this is a draft for comment.
Why SEBI is proposing this
The SME Platform has grown fast. As on 31 July 2026, 1,496 entities had listed on it since inception, 365 had migrated to the Main Board, and SME IPOs had raised ₹40,222 crore. SEBI says the segment now covers a wider range of sizes, so the framework should be reviewed for proportionality and ease of compliance.
Background: the earlier position
An issuer with post-issue paid-up capital up to ₹10 crore is eligible under Regulation 229(1). An issuer with more than ₹10 crore and up to ₹25 crore may also use the SME framework under Regulation 229(2). SEBI's analysis of 735 Main Board and SME IPOs in the last three financial years showed a wide gap between paid-up capital and market capitalisation.
Effect in practice
Paid-up capital is only nominal share capital, so a business with low paid-up capital but a high valuation could be forced onto the Main Board. Some Main Board issuers also did bonus issues just to meet the capital threshold, at extra cost and with tax and compliance implications. A market cap test would remove that need. In return, larger issuers choosing the SME route would face Ind AS reporting, and everyone would need to watch valuation until the final prospectus is filed.
| Provision | Before | Now | What it means |
|---|---|---|---|
| Regulation 229(1), ICDR Regulations | An issuer is eligible to make an initial public offer only if its post-issue paid-up capital is less than or equal to ten crore rupees. | An issuer whose post-issue capital calculated at the offer price does not exceed one thousand crore rupees shall undertake an IPO under this Chapter. | The test moves from paid-up capital to market capitalisation. Issuers up to ₹1,000 crore would use only the SME Platform. |
| Regulation 229(2), ICDR Regulations | An issuer whose post-issue paid-up capital is more than ten crore rupees and up to twenty five crore rupees may also issue specified securities under this Chapter. | An issuer whose post-issue capital at the offer price is more than one thousand crore rupees and up to four thousand crore rupees may also undertake an IPO under this Chapter, and must disclose restated consolidated financial statements under Ind AS. | The optional band widens to ₹1,000-4,000 crore, with Ind AS reporting as the condition. |
| Schedule XVI, new clause (4) | No provision on switching frameworks when market cap changes after the draft is filed. | Market cap is tested again at the Red Herring Prospectus or Prospectus stage; the issuer re-files under the SME or Main Board framework as the thresholds require. | Issuers must plan for a possible re-filing if valuation moves between the draft and final offer document. |
5.1.1.3.1. An issuer having post issue market capitalization up to ₹1,000 crore shall be required to access only SME Platform;
5.1.1.3.2. An issuer having post issue market capitalization above ₹1,000 crore and up to ₹4,000 crore may also access SME Platform.
Therefore, an issuer having post-issue market capitalization above ₹1,000 crore and up to ₹4,000 crore may also access the SME Platform. However, such issuer shall be required to present its restated consolidated financial statements prepared in accordance with Ind AS for the last three financial years and the stub period, if any
Regulation 229(1) An issuer, whose post-issue capital calculated at the offer price does not exceed one thousand crore rupees shall undertake initial public offer of specified securities in accordance with provisions of this Chapter.
Regulation 229(2) An issuer, whose post-issue capital calculated at the offer price is more than one thousand crore rupees and up to four thousand crore rupees, may also undertake initial public offer of specified securities in accordance with provisions of this Chapter.
Provided that such issuer shall disclose its restated consolidated financial statements prepared in accordance with Ind AS.
- Post-issue market capitalisation
- The value of the company after the IPO, calculated at the offer price.
- Paid-up capital
- The nominal value of shares issued and paid for by shareholders. It does not show the company's market value.
- Ind AS
- Indian Accounting Standards, the accounting framework used by larger companies in India.
- Stub period
- The part of the current financial year, up to the latest reporting date, that is not covered by a full-year audit.
- Red Herring Prospectus
- The offer document filed before a book-built issue opens. It does not state the final price.
- DRHP
- Draft Red Herring Prospectus, the draft offer document filed with SEBI before an IPO.
This update summarises an official document for general information. It is not legal advice; please consult us before acting on it.