SME IPO Rules To Change From July 1 — Check Out New Rules Coming Into Play

The National Stock Exchange has announced changes in the bidding process for Small and Medium Enterprises' initial public offerings. The new process, that will take effect from July 1, 2025, is aimed at standardising and streamlining SME IPO participation.

According to the circular on NSE, the current and the new process will remain operational for all SME IPOs opening on or before June 30, 2025. If there is a case of spillover, then the dual system will be permitted until July 11, the circular stated. After this the new bidding mechanism will be mandatorily applicable to all SME IPOs.

• Replacing the ‘Retail Individual Investor’ category with ‘Individual Investor’.

• The minimum bid size for individual investors has been fixed at two lots, with the minimum amount of Rs 2 lakh. This is notably higher from the earlier thresholds aimed at smaller investors.

• Bidding at the cut-off price will no longer be permitted for any investor category. "By scrapping the cut-off price mechanism and disallowing bid cancellations or downward revisions, SEBI is introducing much-needed price discipline," said Tarun Singh, managing director and founder, Highbrow Securities.

• Investors across categories will not be allowed to modify their bids downward or even cancel them once submitted.

• On the last day of the bidding process, bidding across all categories will close at 4:00 p.m.

• UPI mandate confirmation or acceptance will be available up to 5:00 p.m. "Tighter UPI timelines, standardised bidding rules, and the removal of leniencies for certain investor categories point to a serious upgrade in how SME IPOs are expected to function," he added.

• In employee category, the bids should be a minimum of two lots with an application amount above Rs 2 lakh. Applications must be in multiples of lot size and cannot exceed Rs 5 lakh.

• Shareholder and policyholder investors will be required to apply for at least two lots, with the minimum investment exceeding Rs 2 lakh.

• Qualified institutional buyers and non-institutional investors must also place bids for over two lots.

"This is SEBI signalling that the SME platform is no longer a regulatory sandbox; it’s evolving, and it’s going to be held to higher standards. The days of relaxed rules for SME listings are over; SEBI is aiming for greater transparency, better quality companies, and stronger investor trust," added Singh.