BSE Calls for Stricter SME IPO Rules – What It Means for Entrepreneurs and Investors
The Bombay Stock Exchange (BSE) is pushing for a fresh round of reforms in the SME IPO (Small and Medium Enterprises Initial Public Offering) space, with proposals aimed at making the ecosystem more transparent and investor-friendly. The Securities and Exchange Board of India (SEBI) is reviewing these suggestions, which could reshape how SMEs raise funds in India.
We at ASB Growth Ventures, believe these regulatory changes are not just rules on paper—they directly impact how startups and growing businesses plan their fundraising journey. Let’s break it down in simple words.
Why Is BSE Asking for Stricter SME IPO Rules?
Since the launch of the BSE SME platform in 2012, over 615 companies have raised nearly ₹11,300 crore. The momentum is strong, with over ₹8,100 crore raised in the last five years alone. However, not all stories have been smooth.
SEBI has discovered cases where IPO proceeds were diverted, and merchant bankers (the middlemen handling IPO funds) sometimes held too much control. To fix these gaps, BSE has suggested stricter norms to ensure transparency, accountability, and better governance.
At ASB Growth Ventures, we often advise startups that fundraising is not just about raising money, it’s about building trust. These reforms are a step in that direction.
Key Proposals on the Table
Here’s what BSE has recommended, in simple terms:
1. More Transparency in IPO Costs
Companies may soon need to disclose any private arrangements with merchant bankers. This means investors will know exactly how much is being spent on the IPO process.
For entrepreneurs, this builds credibility. At ASB Growth Ventures, we help businesses streamline their fundraising costs so that money is used effectively.
2. Better Monitoring of Funds
Instead of just a deviation certificate (a broad compliance document), SEBI may require a detailed utilisation certificate. A monitoring agency could also be made mandatory to track how IPO funds are being used.
For startups, this means being more disciplined with money. With ASB Growth Ventures, businesses can prepare reporting structures that align with SEBI’s evolving requirements.
3. Stricter Norms for Merchant Bankers
Merchant bankers play a huge role in SME IPOs, but SEBI has caught multiple cases of misuse. New rules may limit conflicts of interest and raise the eligibility criteria for merchant bankers.
This protects SMEs and investors. At ASB Growth Ventures, we partner only with reputed financial advisors and bankers to safeguard our clients’ growth journey.
4. Educating SME Promoters
SMEs often lack corporate governance experience compared to large companies. BSE is working with state agencies to train promoters on compliance and disclosure.
At ASB Growth Ventures, we strongly believe education and guidance are as important as funding. We regularly mentor promoters on how to navigate IPOs successfully.
What This Means for SME Investors
SME IPOs are not meant for casual retail investors—they carry higher risks and require deeper evaluation. As BSE CEO Sundararaman Ramamurthy highlighted, this segment is for anchor-type investors who understand long-term risks and rewards.
For entrepreneurs, stricter rules mean only serious, well-prepared businesses will get listed. This builds long-term credibility for the SME platform.
The Big Picture
Out of the 615 companies listed so far, 186 have already migrated to the main board, proving that SMEs can scale when given the right platform. At the same time, around 55 companies have been suspended or delisted, which shows the importance of compliance.
The new reforms aim to reduce misuse, protect investors, and ensure that SME IPOs continue to be a healthy channel for India’s growth story.
ASB Growth Ventures – Your Partner in the IPO Journey
At ASB Growth Ventures, we understand that navigating IPO rules, SEBI compliance, and merchant banker processes can feel overwhelming for SMEs. That’s why we specialize in:
- IPO Advisory for SMEs and startups
- Fundraising strategy and compliance support
- Governance and transparency guidance
- Investor readiness programs
As the rules around SME IPOs get stricter, having the right partner matters more than ever. With ASB Growth Ventures, you don’t just prepare for an IPO—you prepare for sustainable growth and long-term success.
Pro Tip from ASB Growth Ventures: If you’re an SME considering an IPO, start working on your governance, financial transparency, and reporting structures early. The stronger your foundation, the smoother your IPO journey will be.