SEBI has issued a consultation paper, dated 14 October 2026, proposing changes to the SME IPO provisions of the ICDR Regulations 2018. It is a set of proposals, not a notified rule. Our IPO records list 1 forthcoming issues as of 31 October 2026, and all of them remain under the current rules. The main changes would move SME eligibility from paid-up capital to post-issue market capitalisation, cut the minimum SME application value to Rs 1 lakh and raise the minimum allottees from 200 to 500. Comments close on 4 November 2026.
What the paper proposes
The table sets each main item against the rule the paper describes as existing. The paper does not fix an effective date: the revised framework depends on notification in the Official Gazette.
| Item | Existing rule (per the paper) | Proposed (per the paper) | Effective date |
|---|---|---|---|
| SME eligibility | Post-issue paid-up capital up to Rs 10 crore; Rs 10 crore to Rs 25 crore may also opt in (Regulations 229(1) and 229(2)) | Post-issue market capitalisation: up to Rs 1,000 crore on the SME platform only; Rs 1,000 crore to Rs 4,000 crore may also opt in, with Ind AS reporting | Not set; after notification |
| Minimum application | Two lots, minimum value above Rs 2 lakh (Regulation 267) | Minimum value Rs 1 lakh, in lots of Rs 25,000, so at least four lots | Not set; after notification |
| Minimum allottees | 200 (Regulation 268) | 500 | Not set; after notification |
| Retail allotment | Allotment linked to the minimum lot size | Each retail investor gets at least one minimum lot, subject to availability; the rest is allotted pro rata | Not set; after notification |
| Offer for sale | OFS capped at 20% of issue size; shareholders in the offer for sale capped at 50% of pre-issue holding (Regulation 230) | Dedicated OFS rules with a one-year holding period; QIB shareholders in the offer for sale may go beyond the 20% cap. The paper also proposes removing their 50% cap, but not for the alternative route under Regulation 229(7) | Not set; after notification |
| Underwriting | 100% underwriting, plus 15% underwritten by lead managers | Both requirements removed; Main Board underwriting for the unsubscribed portion; a minimum subscription requirement added | Not set; after notification |
| Secondary trading lot | Prescribed trading lot | One share | Not set; after notification |
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Who it affects
The proposals would touch companies planning an SME IPO, investors who apply for SME issues, and companies already on the SME platform, which the paper also covers for trading lot and migration rules. The paper's own figures, as on 31 July 2026 (NSE and BSE data): 1,496 entities listed on the SME platform since inception, 365 of them migrated to the Main Board, Rs 40,222 crore raised through SME IPOs, and a market capitalisation of Rs 4,70,984 crore.
The worked example below uses the lot figures in the paper. It shows how the proposed minimum application value is reached.
Worked example from the lot figures in the SEBI consultation paper of 14 October 2026. Proposal, not in force. Assumptions are the paper's, not a forecast.
| Step | Working | Value |
|---|---|---|
| Proposed lot value | as stated in the paper | Rs 25,000 |
| Lots in the minimum application | paper, four lots | 4 |
| Minimum application value (proposed) | Rs 25,000 x 4 | Rs 1,00,000 |
| Existing minimum application value | paper, Regulation 267 | above Rs 2,00,000 |
Example figures, not today's rates.
Transition and timing
The paper says the revised framework would apply to draft offer documents filed on or after three months from notification in the Official Gazette. In its example, a notification on 31 December 2026 would make the revised framework mandatory for draft offer documents filed from 1 April 2027. Issuers filing within those three months could choose either framework.
What to do
- Read the consultation paper on sebi.gov.in. Eligibility is in section 5.1, OFS in 5.3, application size in 5.5.1 and underwriting in 5.6.1.
- Send comments with reasons by 4 November 2026, through SEBI's public comments form or by email to consultationcfd@sebi.gov.in with the subject line given in the paper.
- Treat the current rules as the rules in force. The paper describes the minimum application value above Rs 2 lakh and the 200 allottee minimum as existing, and they stay until SEBI notifies an amendment.
- Check each IPO's lot size and price band in its red herring prospectus, then use the IPO lot size calculator to get the amount at the upper band.
What has not changed
Nothing in the paper is in force yet. The Rs 2 lakh minimum application value and the 200 allottee minimum remain the existing rules in the paper's own description. Our IPO pages show each live issue's dates and terms as they stand.
Common mistakes
- Treating a consultation paper as a notified rule. Proposals can change after comments.
- Quoting a figure from a news summary without checking the paper's section. Check each number against the paper itself.
- Assuming one lot size applies to every SME issue. Each issue sets its own lot in its prospectus.
