SME IPO eligibility: BSE SME and NSE Emerge criteria

An SME IPO has to pass two sets of tests.

1. SEBI's rules in Chapter IX of the SEBI ICDR Regulations, 2018 (Issue of Capital and Disclosure Requirements). These apply on both exchanges.
2. The exchange's own criteria. BSE SME and NSE Emerge each add conditions. You must meet the criteria of the exchange you file with.

The SME rules in force today come mainly from the SEBI ICDR (Amendment) Regulations, 2025. SEBI notified them on 3 March 2025, and they took effect on publication in the Official Gazette (dated 4 March 2025). The ICDR Regulations were last amended on 21 March 2026, with changes to filings and the abridged prospectus, not to the eligibility tests. NSE checks its criteria when the draft is filed with it, and again when the offer document is filed with the Registrar of Companies.

• Size. A company whose paid-up capital after the issue is up to Rs 10 crore must use the SME platform. From Rs 10 crore to Rs 25 crore, it may choose the SME platform.
• Operating profit. At least Rs 1 crore of operating profit (EBITDA, earnings before interest, depreciation and tax) from operations in at least two of the three previous financial years. There is no other route today if this test is not met.
• Conversion. A proprietorship, partnership firm or LLP that became a company must complete at least one full financial year as a company before filing the draft offer document.
• Promoters. If promoters changed, or new promoters hold more than 50% of the shares, at least one year must pass before filing.
• Promoter contribution. Promoters must hold at least 20% of the capital after the issue, locked in for three years.

These are rules in force today, not proposals.

• Offer for sale (existing shareholders selling their shares) cannot be more than 20% of the issue size. A selling shareholder cannot sell more than 50% of their own holding.
• General corporate purposes (money not tied to a named use) is capped at 15% of the amount raised or Rs 10 crore, whichever is lower. Earlier it was 25%.
• Promoter loans. The money raised cannot be used to repay loans from promoters, the promoter group or any related party.
• Minimum application is two lots, worth more than Rs 2 lakh.
• Monitoring agency (an outside agency that checks how the money is used) is needed where the issue is above Rs 50 crore. Earlier the limit was Rs 100 crore.
• Lock-in. Promoter shares above the 20% minimum are released in two halves: one after one year, the other after two years.
• Public comments. The draft offer document stays open to the public for at least 21 days.
• Compliance officer must be a company secretary.
• More disclosure: provident fund and ESI payments, the merchant banker's site visit report and all merchant banker fees.
• Minimum allottees rose from 50 to 200.
• Growing after listing. A listed SME whose paid-up capital will go above Rs 25 crore after a further issue can stay on the SME platform if it follows the listing rules that apply to Main Board companies.

• Company incorporated in India under the Companies Act.
• Paid-up capital after the issue of not more than Rs 25 crore (face value).
• Track record of at least three years, of the company, its promoters, or a firm it was converted from.
• Promoters with at least three years' experience in the same line of business, holding at least 20% of the capital after the issue.
• Operating profit (EBITDA) of at least Rs 1 crore from operations in at least two of the three previous financial years.
• Positive net worth.
• Positive free cash flow to equity (FCFE) in at least two of the three financial years before applying. FCFE is cash flow from operations, minus purchase of fixed assets, plus money raised from issuing capital, plus net borrowings, minus interest after tax. NSE added capital raised to this formula from 20 April 2026.
• Offer for sale within the SEBI limits above.
• No referral to the former BIFR, no admitted insolvency proceedings, and no admitted winding-up petition.
• No material regulatory or disciplinary action against the company by an exchange or regulator in the past three years.
• The merchant bankers on the issue have not had a draft offer document returned by NSE in the past six months.
• If NSE rejected an earlier application, six complete months must pass before applying again.

From BSE's notice of 24 November 2023, for drafts filed from 1 January 2024. SEBI's Rs 1 crore operating profit test now applies on BSE too.

• Paid-up capital after the issue of not more than Rs 25 crore.
• Net worth of at least Rs 1 crore in each of the two preceding full financial years.
• Net tangible assets of at least Rs 3 crore in the last full financial year.
• Track record of at least three years, including any firm or LLP taken over. A shorter record can be accepted if the project is appraised and funded by institutions such as NABARD or SIDBI, with at least one full year of operations and audited results.
• Positive operating profit from operations in two of the latest three financial years.
• Leverage ratio (debt to equity) of not more than 3:1.
• No change in promoters in the year before applying.
• All promoter shares in demat form, and agreements with both depositories.
• A working website.
• Board formed as the Companies Act requires.
• No pending defaults to debenture, bond or fixed deposit holders; no NCLT referral under the insolvency law; no admitted winding-up petition.
• If the name changed in the last year, at least 50% of revenue from the activity the new name shows.
• Six months' gap after a withdrawn or rejected issue.

• Paid-up capital after issue: BSE SME up to Rs 25 crore. NSE Emerge up to Rs 25 crore.
• Operating profit: Both, at least Rs 1 crore EBITDA in two of the last three years (SEBI rule).
• Net worth: BSE SME at least Rs 1 crore in each of the two preceding years. NSE Emerge positive.
• Net tangible assets: BSE SME at least Rs 3 crore in the last year. NSE Emerge no separate test.
• Cash flow: BSE SME no separate test. NSE Emerge positive FCFE in two of the last three years.
• Leverage: BSE SME not more than 3:1. NSE Emerge no separate test.
• Track record: Both, at least three years.
• Promoters: BSE SME no change in the past year. NSE Emerge three years' experience in the same line of business and at least 20% holding after the issue.
• Cooling-off after rejection: Both, six months.

On 14 October 2026 SEBI published a consultation paper on SME IPOs. Everything in this section is a proposal. Public comments were invited until 4 November 2026, and the paper gives no date from which any change would apply.

• Platform decided by market value after the issue: up to Rs 1,000 crore on the SME platform, and a choice between Rs 1,000 crore and Rs 4,000 crore.
• Profit test of average operating profit of at least Rs 3 crore a year over the three previous years, on restated consolidated accounts.
• For companies that miss the profit test, a book-built route with at least 75% of the offer allotted to qualified institutional buyers.
• After conversion, four completed quarters instead of one full financial year.
• No Rs 10 crore cap on general corporate purposes; the 15% limit stays.
• Minimum application of four lots of Rs 25,000 each (Rs 1 lakh).
• Shorter lock-ins: one year for promoter shares above the minimum, six months for other pre-issue shareholders.
• No compulsory market making, and at least 500 allottees.

Most tests look back over two or three years. So the work starts now, even if the IPO is later.

• Check the operating profit, net worth and cash flow tests on restated figures, not only the audited accounts. Restatement can change the numbers.
• If the business runs as a firm or LLP, plan the conversion early. The one-year clock starts only after it.
• Settle loans from promoters and relatives from the company's own resources, with proper approvals, since IPO money cannot repay them.
• Keep promoters and their holdings stable in the year before filing.

A company that is close to the line can use this time to build steady numbers and clean records. These help with banks and investors too, whatever the final rules turn out to be.