Tough rules on insider trades, SME listings, merchant banks

The underwriting limit for MBs has been raised to 20 times their liquid net worth, giving them flexibility in underwriting

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even after the IPO. In terms of allocation, the methodology for non-institutional investors will now be aligned with the approach used in mainboard IPOs, ensuring uniformity in the treatment of such investors.

In a step to limit the potential end-use of IPO proceeds, Sebi introduced a cap on the amount that can be raised for general corporate purposes (GCP). The GCP amount will be restricted to 15% of the total raised amount or ₹10 crore, whichever is lower. The regulator also prohibited SME IPOs that aim to use the proceeds to repay loans from promoters, promoter groups, or related parties.

To enhance transparency, Sebi mandated that the draft red herring prospectus (DRHP) for SME IPOs must be open for public review for 21 days, during which the public can provide comments. Additionally, SMEs will be allowed to remain listed without migrating to the mainboard, provided they comply with the listing rules governing main-board companies.