/ News · SME IPO · Updated 2026-10-30
SEBI's SME IPO Overhaul: What the October 2026 Consultation Paper Proposes, ₹3 crore average profit, ₹1,000 crore market cap, 500 allottees.
On 14 October 2026 SEBI published a consultation paper proposing a major overhaul of SME IPO rules: a higher profit test (average operating profit of ₹3 crore over three years), eligibility based on market capitalisation, a lower ₹1 lakh minimum application, 500 minimum allottees and no compulsory market making. Comments are due by 4 November 2026. Until SEBI notifies final amendments, the March 2025 rules continue to apply.
Written by CA Durgesh Chavda
Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · NRI taxation, US incorporation, transaction due diligence, forensic audit, AEO, cross-border tax · LinkedIn
/ Current rule vs proposal
Side by side.
| Item | Current rule (ICDR, March 2025) | Proposed |
|---|---|---|
| Eligibility basis | Post-issue paid-up capital | Post-issue market cap: up to ₹1,000 crore must use the SME platform; ₹1,000-4,000 crore may opt in; above ₹4,000 crore must use the main board |
| Profit test | Operating profit of ₹1 crore in at least 2 of the preceding 3 years | Average operating profit of ₹3 crore a year over the preceding 3 years (restated consolidated) |
| If the profit test is not met | Not eligible | Book-built route with at least 75% allotted to QIBs; full refund if not met |
| Minimum application | ₹2 lakh | ₹1 lakh: four lots of at least ₹25,000 |
| Minimum allottees | 200 | 500 |
| Trading lot | Linked to price band | One share |
| Market making | Compulsory | Removed |
| General corporate purposes | 15% of issue, capped at ₹10 crore | 15% of issue; ₹10 crore cap removed |
| Offer for sale | Up to 20% of issue; each seller up to 50% of pre-issue holding | Retained |
| Price band | Cap up to 120% of floor | Cap at least 105% and up to 120% of floor |
| After converting from a firm or LLP | One full financial year before filing | Four completed quarters plus one audited annual statement filed |
/ What it means if you are planning an SME IPO
Practical points.
- Companies that meet today's test (₹1 crore operating profit in 2 of 3 years) but not a ₹3 crore three-year average should consider filing before any amendment takes effect, or plan for the QIB route.
- Companies converted from a partnership, proprietorship or LLP may find the proposed four-quarter rule shorter than today's full-year wait.
- Larger companies (market cap above ₹1,000 crore) would need Ind AS restated consolidated financials if they choose the SME platform, and must go to the main board above ₹4,000 crore.
- Restated, audited financials, clean GST and TDS records, and tidy share-capital history (demat under Rule 9B, FEMA filings for foreign holders) matter under either set of rules.
- You can send comments to SEBI by 4 November 2026.
Sources: Upstox; CAclubindia.
Check your current eligibility with the SME IPO eligibility checker.
Last updated: 30 October 2026. These are proposals; confirm against the consultation paper on sebi.gov.in and any final notification.
/ Ready when you are
Planning an SME IPO?
Email durgesh@bharatquantumprospera.com or WhatsApp +91 78018 87130. Fixed-scope quote within 48 hours.
FAQ
Common questions, answered.
Related reading