SEBI proposes cutting the minimum SME IPO application from Rs 2 lakh to Rs 1 lakh; comments open till 4 November 2026

The Securities and Exchange Board of India (SEBI), the market regulator, has proposed to cut the minimum amount an investor must apply for in an SME IPO from Rs 2 lakh to Rs 1 lakh, according to press reports of a consultation paper dated 14 October 2026. These are proposals only. They are not rules and do not apply to any IPO now. SEBI is taking public comments until 4 November 2026.

An SME IPO is a first public share sale by a small or medium-sized company that lists on the separate SME platforms of the stock exchanges rather than the main board. A consultation paper is a draft that a regulator publishes to collect public views before deciding on a rule.

What would change for investors who apply

According to the reports, the paper proposes that:

• the minimum application value falls from Rs 2 lakh to Rs 1 lakh;
• the minimum lot value would be Rs 25,000, so an application would be at least four lots (Upstox puts it as four lots of at least Rs 25,000 each) (a lot is the smallest bundle of shares that can be applied for);
• the trading lot for SME-listed shares, the smallest quantity that can be bought or sold after listing, falls to one share.

Other proposals reported

• Who lists on SME platforms: a company’s market value after the issue (market capitalisation) would replace its paid-up capital as the test. A company with a post-issue market capitalisation up to Rs 1,000 crore would list on the SME platform. One valued above Rs 1,000 crore and up to Rs 4,000 crore could choose either the SME platform or the main board.
• Profit test: average operating profit of at least Rs 3 crore a year over the three preceding years, in place of Rs 1 crore in two of the preceding three years. A company that misses it could still raise money through a book-building issue if qualified institutional buyers (large institutions such as mutual funds) take at least 75% of the net offer. If that is not met, all money is refunded.
• Market making and underwriting: compulsory market making (where a firm must keep quoting buy and sell prices) would be removed, according to Upstox, TaxGuru and StartupTalky. StartupTalky alone adds that the 100% underwriting requirement would also go, replaced by a 90% minimum subscription threshold; the other reports do not give underwriting terms.
• Minimum allottees: Upstox, TaxGuru and StartupTalky report the minimum number of allottees would rise to 500; Upstox and StartupTalky say from 200.
• Lock-in: shares held by promoters beyond the minimum contribution, and by the promoter group, would be locked in for one year. Other pre-IPO shareholders’ lock-in would be cut from one year to six months.
• Use of IPO money: the Rs 10 crore cap on spending for general corporate purposes would go, while the 15% of issue size limit would stay.
• Offer for sale: a separate framework for institutional investors selling shares, with a one-year holding requirement subject to exemptions.
• Moving between platforms: moving up to the main board would be optional for companies valued at Rs 1,000 crore to under Rs 4,000 crore and mandatory above Rs 4,000 crore, subject to conditions (Upstox, StartupTalky). StartupTalky alone adds that moves from the main board down to SME platforms would stop.

StartupTalky reports that SME platforms have 1,496 listed companies that have raised Rs 40,222 crore in total. StartupTalky and IPA Newspack both say 365 had moved to the main board as of 31 July 2026.

Basis of these figures

SEBI’s consultation paper could not be opened for this article. Figures come from StartupTalky, IPA Newspack, Upstox and TaxGuru, which report on the paper. All agree on the Rs 1 lakh application size, the one-share trading lot, the 4 November deadline, the market-capitalisation thresholds, the Rs 3 crore profit test and the 75% institutional route. The proposals may change before any final rule. This article reports the proposals and does not say whether any IPO suits any investor.