Sebi Proposes Higher Application Size for SME IPOs

New Delhi, Nov 19 (PTI) Markets regulator SEBI on Tuesday proposed increasing the minimum application size for SME IPOs to up to Rs 4 lakh, to ensure that only informed investors with adequate risk appetite and investment capacity can apply.

This move follows a rise in SME (small and medium enterprise) issues, which has driven significant investor participation.

With the rise in SME issues, investor participation in such offerings has also grown significantly. The applicant-to-allotted investor ratio has surged from 4 times in FY22 to 46 times in FY23 and further to 245 times in FY24.

"The retail individual participation has increased in the SME IPO over the last few years. Therefore, considering that SME IPOs tend to have higher element of risks and investors getting stuck if sentiments change post listing, in order to protect the interest of smaller retail investors, it is proposed that the minimum application size in SME IPOs to be increased from Rs 1 lakh to Rs 2 lakh," Sebi said in its consultation paper.

This will ensure that only informed investors who have risk taking appetite and capability are allowed to make applications in SME IPOs.

The higher size will limit participation by smaller investors and will attract investors with a risk taking appetite, which will enhance the overall credibility of the SME segment.

Another proposal suggests increasing the application size from Rs 1 lakh to Rs 4 lakh per application.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposals till December 4.