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SME IPO advisory
A public listing is a legal and financial transformation long before it is a market event. We prepare your company for it, so that the merchant banker, the auditor and the exchange find a business that is ready to be examined.
What an SME IPO involves
BSE SME and NSE Emerge are the dedicated platforms of India’s two main stock exchanges for smaller companies. A company listing on either platform must meet two sets of rules: Chapter IX of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and the listing criteria of the exchange it chooses.
SEBI tightened the SME framework through amendments notified on 3 March 2025. The most significant change for issuers is a minimum operating profit test: EBITDA of at least ₹1 crore from operations in at least two of the three preceding financial years. Positive EBITDA alone no longer qualifies.
The issue itself is managed by a SEBI-registered merchant banker, who files the draft offer document and certifies the due diligence. The restated financial information in that document is examined and reported on by a statutory auditor holding a valid peer review certificate from ICAI. Most of the work that decides whether an IPO proceeds smoothly happens before either of them begins, and that is where we work.
Eligibility at a glance
Reviewed September 2026. Criteria change through SEBI amendments and exchange circulars; always confirm against the current text before filing.
Applies to both platforms (SEBI ICDR, Chapter IX)
| Requirement | Current position |
|---|---|
| Post-issue paid-up capital | Up to ₹25 crore. Above that, the main board route applies. |
| Operating profit | EBITDA of at least ₹1 crore from operations in any two of the three preceding financial years, at the time of filing the draft offer document. |
| Offer for sale | Capped at 20% of the issue size, and no selling shareholder may sell more than 50% of their pre-issue holding. |
| Use of proceeds | General corporate purposes capped at 15% of the issue size or ₹10 crore, whichever is lower. Proceeds cannot be used to repay loans from promoters, the promoter group or related parties. |
| Promoter lock-in | Minimum promoter contribution of 20% of post-issue capital locked in for three years. Holding above that is released in two stages: 50% after one year and 50% after two years. |
| Change in promoters | After a complete change of promoters, or new promoters acquiring more than 50% of the shares, the company must wait one year before filing. |
| Convertible instruments | Outstanding convertible securities or rights to acquire shares generally make the company ineligible, with limited exceptions such as employee stock options. |
| Related-party transactions after listing | SME-listed companies must follow Regulation 23 of the SEBI LODR Regulations. A transaction is material if it exceeds 10% of annual consolidated turnover or ₹50 crore, whichever is lower. |
Exchange-specific criteria
| Track record | At least 3 years, including a proprietorship, partnership or LLP taken over by the company |
|---|---|
| Net worth | At least ₹1 crore for each of the 2 preceding full financial years |
| Net tangible assets | At least ₹3 crore in the last full financial year |
| Leverage | Debt to equity of not more than 3:1 (relaxations for some finance companies) |
| Promoters | 100% of promoter holding in demat form; no change in promoters in the preceding one year |
| Other | A functional company website; agreements with both depositories |
BSE SME does not currently apply a free cash flow to equity test.
| Track record | At least 3 years |
|---|---|
| Net worth | Positive |
| Free cash flow to equity | Positive FCFE in at least 2 of the 3 financial years preceding the application |
| FCFE method | Revised by NSE circular NSE/SME/73818 of 20 April 2026, which counts cash proceeds from issuance of capital. Applies to draft offer documents filed on or after that date. |
Who does what in an SME IPO
An IPO involves several regulated roles. Knowing who is responsible for what avoids duplicated work and gaps.
| Party | Role |
|---|---|
| Merchant banker (lead manager) | SEBI-registered. Manages the issue, conducts due diligence, prepares and files the draft offer document, and underwrites the issue, which must be fully underwritten. |
| Statutory auditor with peer review certificate | Examines the restated financial information and issues the examination report included in the offer document. |
| Legal counsel | Legal due diligence, title, litigation disclosure and the legal sections of the offer document. |
| Registrar to the issue | Processes applications, allotment and share transfers. |
| Market maker | Provides two-way quotes in the company’s shares for a minimum of three years after listing. |
| Company secretary and compliance officer | Board and shareholder processes before listing, and continuing compliance with SEBI and exchange requirements after listing. |
| CAreetu | Readiness adviser to the company. We prepare records, policies, controls and structures, and support the company through diligence. We do not act as merchant banker or underwriter, and we do not examine or certify financial information we have helped prepare. |
How an engagement runs
Most companies start with the diagnostic. The later stages are scoped from what it finds.
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Weeks 1 to 4
IPO feasibility and compliance diagnostic
We review the last three years of audited financial statements, income-tax returns, GST and TDS records, ROC filings, statutory registers, the shareholding history and material contracts. You receive a written report of listing blockers, ranked by severity, with an indicative remediation timeline.
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Months 1 to 6
Structural clean-up
Conversion to a public limited company, regularisation of past share allotments and filings, conversion or settlement of convertible instruments, dematerialisation of promoter holdings, and resolution of promoter and related-party balances.
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Months 3 to 12
Restatement readiness
Accounting policies aligned across all three years, prior-period errors identified, ledgers reconciled and confirmed, and supporting schedules prepared in the form the examining auditor will need under the ICAI Guidance Note on Reports in Company Prospectuses.
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Months 6 to 15
Governance and internal financial controls
Board reconstitution with independent and woman directors, audit and nomination and remuneration committees, related-party transaction policy, risk and control matrices for key processes, and a code of conduct for insider trading.
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From appointment of the merchant banker
Merchant banker diligence support
A structured data room, responses to the due diligence questionnaire, co-ordination of certificates from the auditor and other professionals, and support on the financial sections of the draft offer document.
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After listing
Post-listing compliance
Half-yearly financial results, related-party approvals under Regulation 23, monitoring of proceeds against the stated objects, and ongoing disclosure obligations.
Common questions
Short answers to what founders and CFOs ask most often. The position is as reviewed in September 2026.
How long does it take to prepare for an SME IPO?
For most companies, 12 to 24 months from the first diagnostic to filing. The biggest variables are the state of the last three years of accounts, the capital history, and how much governance has to be built from scratch. The diagnostic gives you an estimate for your company.
What is the difference between BSE SME and NSE Emerge?
Both are SME platforms subject to the same SEBI rules. Their own listing criteria differ: NSE Emerge requires positive free cash flow to equity in two of the last three years, while BSE SME sets minimums for net worth, net tangible assets and leverage. Some companies qualify for one and not the other.
Can a loss-making company list on an SME platform?
Not under the current rules. Since the March 2025 amendments, an SME issuer needs EBITDA of at least ₹1 crore from operations in at least two of the three preceding financial years at the time of filing.
Do we have to change our statutory auditor?
The restated financial information in the offer document must be examined by an auditor holding a valid peer review certificate from ICAI. If your current auditor does not hold one, you will need to plan how that examination will be done, well before filing.
Can IPO proceeds be used to repay loans from promoters?
No. SME issuers can no longer use IPO proceeds to repay loans taken from promoters, the promoter group or related parties. Those balances need a separate plan.
Can we move to the main board later?
Yes. An SME-listed company can migrate to the main board once it meets the exchange’s main board criteria. SME-listed companies can also raise further capital without migrating, provided they comply with the SEBI listing regulations that apply to main board companies.
Is CAreetu a merchant banker?
No. CAreetu prepares companies for the IPO process and supports them through diligence. The issue itself is managed by a SEBI-registered merchant banker appointed by the company, and we work alongside them.
Start with the diagnostic.
A diagnostic tells you, in writing, what stands between your company and a filing, and how long it is likely to take to fix. It is the right first step whether you plan to list in 18 months or are still deciding.