Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2025

What it does

The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 govern how an Indian company raises money from the public by an issue of securities. This instrument is the amendment of those Regulations notified under F. No. SEBI/LAD-NRO/GN/2025/233 and published in the Gazette on 4 March 2025. The Regulations are amended often, and this page describes the amendment of that date, which is the one the site's note on the SME IPO gate treats.

The amendment rewrote most of Chapter IX, the chapter for issuers on the small and medium enterprise platform. It came into force on publication, and the changes to the offer document apply to draft offer documents filed after that date, so companies that had already filed were not pulled back.

Who it binds

Issuers that list on an SME exchange, the merchant bankers who manage their issues, and the promoters and selling shareholders who take part. A company that goes to the main board is tested separately, under regulation 6, and the amendment does not alter that test. The site's note records that a mainboard issuer is tested on net tangible assets, average operating profit and net worth over three years, and that a company failing the test can still go to the main board by book-building with at least 75 per cent of the net offer allotted to qualified institutional buyers. Chapter IX has no equivalent route.

What has changed, and when

The site's note identifies six changes that matter operationally.

Regulation 229 carries the operating profit condition: an SME issuer cannot file a draft offer document unless it has earned operating profit of INR 1 crore from operations in two of the last three financial years. Regulation 230 caps an offer for sale at 20 per cent of the total issue size, bars a selling shareholder from selling more than 50 per cent of its holding, caps general corporate purposes at 15 per cent of the amount raised or INR 10 crore, whichever is lower, and prohibits an issue whose objects include repaying a loan from a promoter, the promoter group or a related party. Regulation 238 releases promoter holding above the minimum promoters' contribution in two tranches, half after one year and the balance after two. Regulation 262 lowers the trigger for a monitoring agency from INR 100 crore to INR 50 crore of fresh issue. Regulation 247 puts the draft offer document in public view for at least 21 days for comments. New regulation 281A gives dissenting shareholders an exit under Schedule XX where the stated objects are later varied.

A further amendment followed on 16 March 2026, under F. No. SEBI/LAD-NRO/GN/2026/299. It is procedural: a draft abridged prospectus now goes in with the draft offer document, and a QR code and link replace the printed abridged prospectus.

What turns on it in practice

The operating profit test turns the IPO question into one for the finance function, because it is an accounting test before it is a capital markets test. The profit must be operating profit from operations, and the test is absolute: INR 1 crore, in two of the three years. A company that is growing but not yet profitable has no route through Chapter IX under the amendment.

The exchange adds its own conditions. The site's note records that NSE Emerge requires, among other things, a three year track record, positive net worth, promoter holding of at least 20 per cent of post-issue capital and positive free cash flow to equity in two of the three preceding years, and that the exchange revised the free cash flow formula by a circular of 20 April 2026.

For the corporate and commercial practice, the questions are practical. Whether the accounts support the INR 1 crore test as defined, and in which years. Whether the proposed objects fall foul of the bar on repaying promoter loans or the cap on general corporate purposes. And whether a promoter's plan to sell part of its holding fits within the cap on the offer for sale. The note on the site works the test through a set of hypothetical accounts to show what clearing the gate looks like and what it costs.

The parent instruments are the 2018 Regulations and the Securities and Exchange Board of India Act, 1992, which the site lists as a related instrument.