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February 18, 2013

Deal Alert: SEBI may relax norms for SME IPOs

Capital market regulator SEBI is looking to make it easier for small companies to list on the dedicated SME platforms of stock exchanges, by relaxing certain criteria such as on underwriting and market making. The regulator wants the platform to be more cost-efficient for issuers. It also wants to bring down the obligation on investment bankers (i-bankers) to attract more participants in this space. 

The underwriting obligation for SME IPOs could be removed. However, issues won’t be able to go through if they failed to garner a minimum of 90% subscription. SEBI is also mulling whether the market making requirement could be brought down from three years to about a year. 

The regulator could also prescribe a lower dilution requirement for promoters. Under the current norms, issuers have to dilute a minimum of 25% equity through SME IPOs. SEBI might also consider the pre-issue shareholding of PE and VC investors as public holding as long as it isn’t “promoter holding in disguise”. 

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