New SME IPO Rules Effective July 1, 2025: Key Changes, SEBI Guidelines & Expert Views

The new regulatory regime with regard to SME IPOs (Small and Medium Enterprises Initial Public Offerings) in India became operational since July 1, 2025. The new rule laid down by the BSE Ltd and the National Stock Exchange (NSE) is meant to bring improved levels of transparency, curbing the speculative involvement of retail investors, and offering greater tightening of the entire IPO process in the matters of SME IPO. Change in these provisions of SME IPO norms underscores the paradigm shift in listing of a company and investing of the SME segment.

So, what has changed and why such rules were imposed and what industry players are stating on how this will be affecting the Indian thriving SME IPO market.

Key Changes in SME IPO Rules Effective July 1, 2025

Minimum Application Size Increased

The minimum application size for SME IPOs is now set at two lots, valued above ₹2 lakh, across all investor categories.
This replaces the earlier lower thresholds that allowed smaller retail investments, limiting access to serious and research-backed investors only.

Cut-Off Price Option Removed

Investors can no longer select the cut-off price while applying for SME IPOs.
This move promotes price discipline by removing speculative bidding practices aimed only at improving allotment chances.

No Bid Revisions or Cancellations Allowed

Investors can no longer cancel or revise bids downward once placed.
This brings greater transparency and reduces manipulation during price discovery.

Tighter Timelines for Bidding & Payment

SME IPO bidding closes at 4:00 PM on the final day.
UPI mandate confirmation deadline is 5:00 PM on the same day.
These revised timelines reduce last-minute issues like delayed allotments or payment failures.

Financial Eligibility of SME Issuers Tightened

SMEs seeking to list must now have a minimum EBITDA of ₹1 crore in two out of the last three years.
This ensures that only companies with credible financial performance can access the SME platform.

Limits on Fund Usage

The allocation for Offer-for-Sale (OFS) is capped at 20% of the issue size.
Funds raised for General Corporate Purpose (GCP) are capped at 15% of the issue size or ₹10 crore, whichever is lower.

Minimum Tick Size Raised

Increasing the minimum tick size filters out casual investors and encourages participation by informed and serious bidders only.

Summary of SME IPO Regulatory Changes (As of July 1, 2025)

Rule Change	Previous Norm	New Norm
Minimum Application Size	One lot, low value	Two lots, > ₹2 lakh
Cut-Off Price Option	Available	Removed
Bid Revisions	Allowed	Not allowed
Bidding Time (Final Day)	Extended till evening	Closes at 4:00 PM
UPI Mandate Time	Flexible	Must confirm by 5:00 PM
Minimum EBITDA	Not strictly enforced	₹1 crore in 2 of last 3 years
Offer for Sale Limit	Flexible	Max 20% of issue size
General Corporate Purpose Limit	Flexible	Max ₹10 crore or 15%
Tick Size	Lower	Increased to filter casual investors

The Reason Behind Use of New SME IPO Norms

Indian SME IPO segment has seen a huge increase in the number of listings over the past few years because of favorable market conditions and high retail activity. Yet, this fast development has also demonstrated loopholes around regulation and the opportunity of market manipulation.

“A slew of recent enforcement actions highlight systemic risks stemming from poor governance, inflated valuations, and misuse of market mechanisms," said Narinder Wadhwa, MD and CEO at SKI Capital Services.

With SEBI keeping a closer watch over such matters, these amended SME IPO guidelines by BSE and NSE are to create a far more sustainable, transparent, and a more investor friendly SME market. Wadhwa opines that despite the fact that the new rules seem to slow down IPO listing in the short-term, it is a corrective measure to healthy capital formation.

Expert Views on New SME IPO Rules

Kresha Gupta, Director & Fund Manager at Steptrade Capital, said:

“By increasing the minimum tick size and removing the cut-off price, the exchanges have ensured that only serious investors participate. SME stocks can be more risky and volatile, so these changes protect investors who may not have done enough research.”

She adds:

“Many retail investors chose the cut-off price to maximize allotment odds without understanding pricing mechanisms. Stricter timelines and removal of price flexibility will enforce more discipline in the bidding process.”

Rush to List Before New SME IPO Rules

Before the deadline of July 1, 2025, SME firms madly tried to take advantage of the older and less strict norms:

In June 2025, more than 30 SME IPOs were floated and they collected more than Rs 1,380 crore.
IPOs that opened on or earlier to June 30 were permitted the dual bidding system (old rules vs. new rules) until July 11, with a spill over period.
After July 11, only the new SME IPO guidelines will apply.

The July 2025 new SME IPO regulations are milestones in SME capital markets in India, development of the same. More safeguards, eligibility filters and bidding restrictions are well on the way to bringing more credibility and accountability into the SME space, by SEBI, with the active cooperation of the stock exchanges.

It is anticipated that such guidelines will minimize frauds in IPOs, restraint a speculative retail trade and list only fundamentally sound firms. Although listing volumes can be expected to be reduced in the short run, the aim in the long term is to achieve a stable and reliable ecosystem of SME IPOs.

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