SME IPO Listing Procedure: Step-by-Step Legal and Regulatory Roadmap

Launching an SME IPO in India requires strict compliance with SEBI ICDR Regulations and the listing requirements of SME platforms such as NSE Emerge and BSE SME. The process involves due diligence, financial checks, statutory approvals and coordination with intermediaries like Merchant Bankers, Registrars and Exchanges. Below is a fully aligned and regulation-based step-by-step procedure for SME IPO listing.

Conduct Detailed Eligibility Assessment

Before initiating the IPO, the company and Lead Manager must verify whether the issuer meets SME Exchange eligibility conditions. Key checks include:

• Minimum post-issue paid-up capital: ₹3 crore (for most SME platforms).
• Tangible net worth and profitability, as per exchange-specific criteria.
• Track record, operational history and compliance status.
• Number of investors, shareholding pattern and promoter background.
• Absence of winding-up petitions, regulatory actions or pending material litigations (unless appropriately disclosed).

The Merchant Banker conducts internal eligibility scrutiny before recommending the company for listing.

 Appointment of Intermediaries

The issuer must appoint SEBI-registered and exchange-approved intermediaries: -

• Lead Merchant Banker (LM) – mandatory
• Registrar to the Issue – mandatory
• Market Maker – mandatory as per SME platform rules
• Underwriters, Legal Advisor, Bankers to Issue – as per requirement

Intermediary agreements must comply with SEBI ICDR Regulations.

Corporate Restructuring & Pre-IPO Compliance

Prior to filing the IPO, the company must complete internal housekeeping and statutory restructuring:

• Reconstitution of Board of Directors to meet corporate governance norms
• Adoption of new AoA aligned with public company requirements
• Conversion into a public limited company (if originally a private company)
• ESOPs, capital reorganization or preferential allotments (if applicable)
• Review of related party transactions and statutory registers
• Updating financial statements, ROC filings and pending compliances

All non-compliances, if any, must be remedied before the due diligence stage.

Start of Due Diligence by Merchant Banker

The Merchant Banker performs comprehensive due diligence covering:

Legal Due Diligence

• Verification of all corporate records, statutory registers, licenses, agreements, litigations, property papers, IP, borrowings and board resolutions.
• Review of compliance under Companies Act, FEMA, Tax laws, Labour laws and industry-specific regulations.

Financial Due Diligence

• Analysis of audited financials as per SEBI ICDR requirements (restated accounts).
• Verification of revenue recognition, related party transactions, contingent liabilities and internal controls.

The LM prepares a Due Diligence Certificate (DDC) mandated by SEBI.

Drafting of Offer Documents (DRHP & RHP)

After due diligence, the Merchant Banker drafts and compiles:

• Draft Red Herring Prospectus (DRHP)
• Red Herring Prospectus (RHP)
• Prospectus (final)

All documents must include:

• Risk factors
• Business overview
• Financial information
• Legal/litigation details
• Management details
• Capital structure
• Objects of the issue
• Material contracts

These documents must comply with SEBI ICDR Regulations, 2018, Companies Act, 2013 and SME Exchange guidelines.

Filing of DRHP with Stock Exchange & SEBI

The LM files the DRHP with:

• The chosen SME Exchange (NSE Emerge / BSE SME)
• SEBI for mandatory review
• The Registrar of Companies (ROC)

The issuer must also publish an advertisement about DRHP filing.

The Exchange and SEBI may raise queries, seek clarifications and request modifications. LM must submit Due Diligence Reports (DDR) as required by SEBI.

Site Visit by Exchange

The SME Exchange conducts a visit to:

• Inspect the company’s facilities
• Review operations, manufacturing units, offices
• Cross-check disclosures made in DRHP
• Verify management background and internal controls

The report influences the Exchange’s approval decision.

In-Principal Approval from Stock Exchange

After reviewing the DRHP, due diligence reports, reply to queries and site visit findings, the Exchange issues in-principal approval for IPO listing.

This approval is mandatory before opening the issue.

Marketing, Investor Roadshows & Price Finalization

The Merchant Banker coordinates:

• Investor presentations
• Broker meets
• Market Maker discussions
• Pricing analysis and valuation review

Pre-issue publicity must strictly comply with SEBI advertising guidelines.

Filing of RHP with ROC

After receiving in-principal approval, the LM files the RHP with ROC.

This document contains the finalized issue structure, dates and updated disclosures.

Opening of the IPO

The IPO is opened for public subscription. The process includes:

• ASBA applications
• UPI-based applications (for investors)
• Allocation reservation for Market Maker
• Monitoring by LM and Registrar

The issue remains open for 3–5 working days.

Basis of Allotment & Finalization

After closure:

• Registrar compiles subscription data
• Exchange finalizes Basis of Allotment
• LM ensures compliance with SEBI norms
• Market Maker receives mandatory allotment
• Investors receive allotment or refund

Credit of Shares & Listing Approval

Registrar credits allotted shares to investors’ Demat accounts.

Issuer submits listing documents and compliance certificates to the Exchange.

The Exchange grants trading approval after reviewing: -

• Issue results
• Compliance reports
• Public shareholding norms
• Market Maker allocation

Listing & Commencement of Trading

Shares are listed and admitted to trading on the SME platform.

A bell-ringing ceremony may be conducted.

Post-listing compliances begin immediately:

• Quarterly results
• Corporate governance filings
• Submission of shareholding pattern
• Timely disclosures of material events

Conclusion

The SME IPO process is a structured legal and regulatory journey requiring accurate disclosures, compliance with SEBI ICDR norms and coordination with multiple intermediaries. Following the above roadmap ensures transparency, regulatory compliance and a smoother approval process for SMEs planning to raise capital through public markets. If you are seeking for professional help in this case, then feel free to contact Remind Legal.