Highlights of the 208th meeting of the SEBI Board

Current Context: The 208th board meeting of the Securities and Exchange Board of India (SEBI) took place on December 18, 2024, in Mumbai. The meeting was chaired by Madhabi Puri Buch, the Chairperson of SEBI.

• The aim of the meeting was to introduce several key regulatory changes to enhance compliance, improve investor protection, and streamline market operations.
• Stricter Norms for SME IPOs:
• Eligibility Criteria: Issuers must now demonstrate an operating profit of at least ₹1 crore in two of the past three financial years to be eligible for an IPO.
• Offer for Sale (OFS) Restrictions: Selling shareholders in SME IPOs are limited to 20% of the total issue size, and individual sales are capped at 50% of their holdings.
• Lock-in Period Adjustments: Lock-in provisions for promoters' excess holdings have been modified to allow for a phased release.
• Allocation for Non-Institutional Investors (NIIs): The NII allocation methodology for SME IPOs has been aligned with that of main board IPOs.
• Cap on General Corporate Purpose (GCP) Funds: GCP amounts in SME IPOs are capped at 15% of the issue size or ₹10 crore, whichever is lower.
• Restriction on Repayment of Promoters' Loans: SME IPO proceeds cannot be used to repay loans taken by promoters, promoter groups, or related parties.
• Other Key Highlights:
• Business Responsibility and Sustainability Reporting (BRSR): SEBI approved a one-year deferral on ESG disclosures for the value chain, moving the requirement from the fiscal year 2024-25 to 2025-26.
• Recognition of a Past Risk and Return Verification Agency (PaRRVA): SEBI proposed the recognition of a PaRRVA to ensure safer investment choices for the public by providing historic data for investment products.
• Amendments to the definition of Unpublished Price Sensitive Information (UPSI): The changes were made to enhance regulatory clarity and streamline compliance in the market.
• Support for Small and Medium REITs: SEBI has taken steps to standardize disclosures, including bifurcating the scheme offer document into Key Information of the Trust (KIT) and Key Information of the Scheme (KIS).
• Reforms for Mutual Fund Regulations: SEBI introduced amendments to its Mutual Fund Regulations, easing the framework for Asset Management Companies (AMCs) in terms of aligning the interest of employees with that of unitholders.

Question:

1 What is the revised eligibility criterion for issuers to participate in SME IPOs as per the SEBI meeting?

• A) Operating profit of at least ₹1 crore in two of the past three financial years
• B) Total revenue of ₹10 crore in the last financial year
• C) Operating profit of ₹50 lakh in at least one financial year
• D) Market capitalization of ₹100 crore at the time of listing

Answer: A) SEBI has mandated that issuers must demonstrate an operating profit of at least ₹1 crore in two of the past three financial years to be eligible for SME IPOs.