EBITDA: First and foremost, for launching an IPO an issuer must have Rs 1 crore of EBITDA (before interest, depreciation, and tax) when it comes to DRHP or any 2 years of operation profit can also be relevant.
OFS (Offer for Sale): In SME IPOs, only 20% of the amount could be sold in the OFS (Offer For Sale) process means promoters can only sell 20% of shares, and promoters can be allowed to sell more than 50% of their stakes.
MPC / Lock-in: Lock-in on promoters’ holding held in excess of minimum promoter contribution (MPC) to be released in a phased manner i.e. lock-in for 50% of promoters’ holding in excess of MPC shall be released after 1 year and lock-in for remaining 50% promoters’ holding in excess of MPC shall be released after 2 years.
Methodology: While in SME IPOs allocation of the NII (non-institutional investors) categories would be the same as the mainboard IPO process.
General Corporate Purpose: Moreover, fund deployment for general purposes could be only 15% of the proceeds or Rs 10 crores which is lower.
Repayment of Loan: SME IPO (Initial Public Offerings) funds are not allowed to fulfill the repayment or loan of a promoter, the promoter group, or any related party, either directly or indirectly (objects of the issue).
Public Comments: The SME IPO DRHP (Draft Red Herring Prospectus) should be accessible for public comments for 21 days. It should be announced in the newspaper with a QR code for easy access to the DRHP.
Mainboard Migration: SME companies can also take more shares without moving to the MainBoard, as long as the issuer agrees to follow the SEBI (LODR) Regulations, 2015, which apply to companies listed on the Main Board.
Related Party Transaction (RPT): Related party transaction (RPT) norms, as applicable to listed entities on the Main Board, are to be extended to SME-listed entities, provided that the threshold for considering RPTs as material shall be 10% of annual consolidated turnover or Rs. 50 crore, whichever is lower.
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