BSE SME IPO Eligibility Criteria

The following eligibility criteria are based on the requirements applicable to the BSE SME platform, including provisions under SEBI (ICDR) Regulations and additional conditions prescribed by the Exchange and recent regulatory amendments.

Incorporation

The company must be incorporated under the Companies Act, 2013 (or the Companies Act, 1956, as applicable).

Eligibility Criteria

Post-Issue Paid-Up Capital

The post-issue paid-up capital of the company must not exceed Rs. 25 crores.

Net Worth

The company must have a minimum net worth of Rs. 1 crore for each of the two preceding full financial years.

Note: In cases where a company has been formed through the conversion of a registered proprietorship, partnership firm, or LLP, the predecessor entity must have maintained a net worth of Rs. 1 crore for the two preceding full financial years.

Net Tangible Assets

The company must have net tangible assets of at least Rs 3 crores in the last preceding (full) financial year.

Track Record

The applicant company must have a minimum operational track record of 3 years In cases where the company has taken over a proprietorship concern, registered partnership firm, or LLP, the combined track record of the applicant company along with the acquired entity, must be at least 3 years.

In all cases, the applicant company must have completed at least one full financial year of operations and must have audited financial results available for at least one full financial year.

Alternative Route

Where the applicant company does not meet the 3-year track record requirement, the project for which the IPO is being proposed must be appraised and funded by NABARD, SIDBI, Banks, (excluding co-operative banks), or Financial Institutions. Even in this case, the company must have a track record of operations for at least one full financial year, along with audited financial results for one full financial year.

Minimum Operational History After Incorporation

Irrespective of the track record being derived from promoters, a promoting company, or a converted entity, the issuer company must have completed at least one full financial year of operations after incorporation, along with audited financial statements for that period.

Note: For companies converted from proprietorship, partnership firms, or LLPs, financial statements must comply with Schedule III of the Companies Act, 2013 and must be certified by an auditor holding a valid ICAI Peer Review Board certificate.

Earnings Before Interest, Depreciation and Tax (EBIDT)

The company, or its predecessor proprietorship concern, registered firm, or LLP, must have generated an operating profit of at least Rs. 1 crore (EBIDT) from operations in at least 2 out of the 3 latest financial years preceding the application date. Additionally, the company must have recorded an operating profit from operations in at least one full financial year immediately preceding the application date.

For companies whose projects have been appraised and funded by NABARD, SIDBI, Banks (other than co-operative banks), or Financial Institutions, it is sufficient to have positive operating profit (EBIDT) from operations in at least one full preceding financial year.

Leverage Ratio

The company's leverage ratio must not exceed 3:1. Relaxation from this requirement may be considered for finance companies.

Disciplinary Action

• No stock exchange with nationwide trading terminals should have taken any regulatory action, including suspension of trading, against the promoter(s) or any companies promoted by them.
• The promoter(s) or directors must not hold the position of promoter or non-independent director in any company that has been compulsorily delisted by the Exchange or is suspended from trading due to non-compliance.
• No director of the company should have been disqualified or debarred by any regulatory authority.
• The issuer, its promoters, promoter group, directors, or selling shareholders must not have been debarred by SEBI from accessing the capital market.
• The issuer or any of its promoters or directors must not be classified as a wilful defaulter, fraudulent borrower, or fugitive economic offender under the Fugitive Economic Offenders Act, 2018.

Default

The applicant company, its promoters, promoting company(ies) and subsidiary companies must have no pending defaults in the payment of interest and/or principal to debenture holders, bond holders, or fixed deposit holders.

Name Change

• In cases where the company has changed its name within the last year, at least 50% of the revenue, calculated on a restated and consolidated basis for the preceding one full financial year, must have been generated from the activity reflected in its new name.
• The activity associated with the new name must have contributed to at least 50% of the revenue, on a restated and consolidated basis, for the preceding one full financial year.

Outstanding Convertible Securities

The company must not have any outstanding convertible securities or rights that entitle any person to subscribe for equity shares of the issuer (other than ESOPs) at the time of filing for an SME IPO.

OFS Restrictions

• The Offer for Sale (OFS) component in an SME IPO shall not exceed 20% of the total issue size.

The number of shares offered by each selling shareholder through OFS shall not exceed 50% of their pre-issue shareholding on a fully diluted basis.

Use of IPO Proceeds

The proceeds shall not be used, either directly or indirectly, for the repayment of loans or advances taken from the promoter, promoter group, or any related party.

The amount earmarked for General Corporate Purposes (GCP) shall not exceed 15% or Rs. 10 crores, whichever is lower, of the amount raised. The aggregate amount for GCP and unidentified acquisitions shall not exceed 25% of the total amount raised.

Special Criteria for Certain Categories of Businesses

While the eligibility criteria outlined above apply to all companies seeking listing on the BSE SME platform, certain categories of businesses are subject to additional sector-specific requirements over and above the standard criteria. These additional conditions have been prescribed keeping in mind the unique nature of operations, regulatory obligations and financial structures of such businesses.

A. Additional Criteria for Broking Companies Applying for SME IPO

Net Worth and Profitability:

The broking company must satisfy one of the following conditions:

• A minimum net worth of Rs. 5 crores along with a profit before tax of at least Rs. 5 crores in any 2 out of 3 financial years, or
• A minimum net worth of Rs. 25 crores in any 3 out of 5 financial years

Each financial year considered must be a full period of 12 months. Extraordinary income shall not be taken into account for computing profits.

Net Tangible Assets:
The broking company must have net tangible assets of at least Rs. 3 crores as per its latest audited financial results.

Post-Issue Paid-Up Capital:
The post-issue paid-up capital of the broking member must be a minimum of Rs. 3 crores.

B. Additional Criteria for Micro Finance Companies

In addition to meeting all standard SME listing criteria, micro finance companies must have:

• An Asset Under Management (AUM) of at least Rs. 100 crores
• A client base of 10,000 or more

Must not have accepted or held any public deposits

Other Requirements (Applicable to All Companies)

• The company must have a functional website.
• 100% of the promoter's shareholding in the company must be held in dematerialised form.
• The company must facilitate trading in demat securities and must enter into agreements with both depositories.
• There must be no change in the promoters of the company during the one year preceding the date of filing the application to BSE for listing under the SME segment.
• Where there has been a change in promoter ownership exceeding 50%, the company must observe a waiting period of 1 year from the date of such change before filing the draft offer document.
• The composition of the board must be in compliance with the requirements of the Companies Act, 2013 at the time of in-principle approval.
• Net worth shall be computed as per the definition provided under the SEBI (ICDR) Regulations.
• Promoters must hold a minimum contribution of 20% of post-issue paid-up capital, which shall be locked in for 3 years from the date of allotment. Excess promoter shareholding beyond 20% shall be locked in for 1 year from the date of allotment.
• All pre-issue capital held by non-promoters is subject to a lock-in of 1 year from the date of allotment.
• The issue must be 100% underwritten, with the Merchant Banker underwriting a minimum of 15% of the issue size from their own account.
• Appointment of a Market Maker is mandatory for a minimum period of 3 years post-listing.
• Where the issue size exceeds Rs. 50 crores, appointment of a Monitoring Agency is mandatory.
• A Statutory Auditor Certificate for fund utilisation must be submitted along with quarterly financial statement filings. Where working capital as an object of issue exceeds Rs. 5 crores, an additional auditor certificate is required.
• The SME IPO DRHP must undergo a 21-day public review, with newspaper advertisements published within 2 days of filing. A QR code must be provided for seamless investor access.
• The issuer must make firm financial arrangements through verifiable means for at least 75% of the proposed means of finance for the project intended to be funded from issue proceeds, excluding the amount to be raised through the proposed public offer and existing internal accruals.
• The Company must not have been referred to NCLT under the Insolvency and Bankruptcy Code (IBC).
• There must be no winding-up petition against the company that has been admitted by the court.

Cooling-Off Period: A minimum gap of 6 months is required from the date of withdrawal or rejection of the issue by SEBI/Exchanges before a fresh application can be made.

Investor Participation & Issue Structure

• The SME IPO must have a minimum of 200 allottees (investors) at the time of allotment.
• Investors are required to apply for a minimum of 2 lots, resulting in a minimum application size of ₹2 lakhs or more, depending on the issue price and lot size.

The company must ensure a minimum 25% public shareholding post-issue, in line with SEBI requirements.