IPO Advisory — SME and Main-Board IPO Readiness
Before a merchant banker can take you public, the company must be ready: public-company status, demat shares, clean restated accounts and a listing-ready board. We get the company there, starting with an eligibility test under SEBI’s ICDR Regulations.
What it is
IPO advisory is the preparation a company needs before it can file for an initial public offering (IPO). The issue itself is managed by a SEBI-registered merchant banker. Our IPO advisory covers the groundwork, so that when the merchant banker starts due diligence, the company is ready to file.
The rules come from two places. Under Section 23(1) of the Companies Act, 2013, only a public company can offer securities to the public through a prospectus. The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR) set the eligibility tests: Chapter II for main-board issues and Chapter IX for SME issues on platforms such as BSE SME and NSE Emerge.
Who it applies to
Profitable family-run SMEs
Manufacturers and service firms with steady operating profit that want growth capital, and perhaps a partial exit for some promoters.
Companies outgrowing private funding
Firms backed by angels or private equity that now want a liquid market for their shares.
SME-listed companies moving up
SME-listed companies planning to migrate once they meet the main-board tests.
Why it matters
Spot eligibility gaps a year early
Take a Faridabad engineering company that crossed ₹1 crore of EBITDA only last year. It needs one more such year before it meets the SME test.
Clean up before due diligence
A missed ROC filing or an undocumented share transfer will surface in the merchant banker’s checks. Fixing it first costs far less.
Plan to the 2025 rules
SEBI tightened SME IPO norms through the ICDR amendment notified on 4 March 2025. A plan drawn up on the older rules needs a fresh look.
SME IPO or main board: key tests
| Test | SME platform (Chapter IX) | Main board (Regulation 6(1)) |
|---|---|---|
| Size | Post-issue paid-up capital up to ₹10 crore, with the option up to ₹25 crore | Exchange norms include minimum post-issue paid-up capital of ₹10 crore |
| Profit | Operating profit (EBITDA) of ₹1 crore from operations in any 2 of the 3 previous financial years | Average operating profit of ₹15 crore over the preceding 3 years, with operating profit in each year |
| Assets and net worth | Exchange-specific net worth and net tangible asset norms | Net tangible assets of at least ₹3 crore and net worth of at least ₹1 crore in each of the preceding 3 years |
| Offer for sale | Not more than 20% of the issue; each seller can sell up to 50% of their holding | As per ICDR limits |
| Minimum application | ₹2 lakh | As fixed for the issue |
Here is the catch for many family companies. The SME route bars using issue proceeds to repay loans from promoters, the promoter group or related parties. General corporate purposes are capped at 15% of the amount raised or ₹10 crore, whichever is less. Say the promoters have lent the company money over the years and hoped to repay themselves from the issue. That plan no longer works, so the objects need real thought.
Documents required
Corporate records
- Incorporation certificate, MOA and AOA
- Statutory registers and minutes
- ROC filings and share allotment records
Financial records
- Audited financial statements for the last three years
- Restated financial statements for the offer document
- Tax returns, GST returns and assessment details
- Loan sanction letters and charge details
Promoters and business
- KYC and background of promoters and directors
- Demat statements of promoter shareholding
- Material contracts, licences and litigation details
- Business plan and the proposed objects of the issue
How it works
Test eligibility on your audited numbers
We run three years of audited results through the SME and main-board tests and tell you which route is open today.
Convert to a public company
A private company becomes a public company by special resolution and alteration of its articles; we handle the private to public conversion, extra directors and members, and capital restructuring.
Demat the shares and fix old filings
Promoter shares must be fully in demat form. We arrange dematerialisation of shares, file missed ROC forms and reconcile the share capital history.
Put a listing-ready board in place
We help appoint independent directors and set up the committees and policies a listed company needs. In practice, finding the right independent directors takes time, so we start early.
Support the merchant banker’s work
Once you appoint a SEBI-registered merchant banker, we support their due diligence, answer queries on accounts and corporate records and help with draft offer document inputs.
Timelines
Start one to two years ahead
Both routes test the three previous financial years. That is why readiness work usually begins a year or two before the target filing.
Allow 21 days for public comments
For SME issues, the draft offer document must be made public for comments for at least 21 days from the public announcement.
Plan around the promoter lock-in
For SME issues, the minimum promoter contribution of 20% is locked in for three years. Holdings above that are released in two halves, after one year and after two years.
What happens if you are not IPO-ready
The exchange or SEBI returns the draft
Gaps in eligibility or disclosure bring observations and delays, and can get the draft returned.
Valuation takes a hit
Audit qualifications, open litigation and tangled related-party dealings make investors cautious, and the price they pay falls.
Listing brings ongoing duties
After listing come results, shareholding patterns and event disclosures, all on deadline. Weak systems show up in the first quarter.
Frequently asked questions
What is the profit requirement for an SME IPO?
The company needs an operating profit (EBITDA) of at least ₹1 crore from operations in any two of the three previous financial years. SEBI added this test through the ICDR amendment notified on 4 March 2025. BSE SME and NSE Emerge add their own norms on net worth, track record and debt. We test your audited numbers against all of these first, so you know where you stand before spending on the issue.
Can a private limited company go for an IPO?
Not as it is. Under Section 23(1) of the Companies Act, 2013, only a public company can issue securities to the public through a prospectus. A private company first converts by special resolution and alteration of its articles under Section 14, and must then have at least seven members and three directors. We handle the conversion as part of the readiness plan, usually well before the merchant banker starts work.
What is the difference between an SME IPO and a main-board IPO?
The main difference is size and eligibility. An SME IPO lists on platforms such as BSE SME or NSE Emerge and suits companies with post-issue paid-up capital up to ₹10 crore, or up to ₹25 crore by choice. The main board under Regulation 6(1) needs average operating profit of ₹15 crore over three years, net tangible assets of ₹3 crore and net worth of ₹1 crore each year. Starting on SME and migrating later is a common path.
How much of the SME issue can be an offer for sale?
Not more than 20% of the total issue size, and no seller may sell more than 50% of their holding. These limits came with the ICDR amendment of 4 March 2025, so most of an SME issue must now be fresh capital going into the company. If promoters want a part exit, we help plan the split between fresh issue and offer for sale within these limits.
Can IPO money be used to repay promoter loans?
Not in an SME IPO. The objects of the issue cannot include repaying loans taken from promoters, the promoter group or any related party. General corporate purposes are also capped at 15% of the amount raised or ₹10 crore, whichever is less. Build the objects around capital expenditure, working capital or bank debt instead, and we will review them early.
How long are promoter shares locked in after an SME IPO?
The minimum promoter contribution of 20% of post-issue capital is locked in for three years. Promoter holding above that minimum is released in two equal parts, 50% after one year and the rest after two years. This phased release was introduced by the 2025 amendments. We map the lock-in dates so promoters can plan personal liquidity around them.
Is Taxhint a merchant banker?
No. Every IPO must be managed by a SEBI-registered merchant banker, who files the offer document and leads the issue. Taxhint Advisors is a compliance and advisory firm. We prepare the company: eligibility testing, conversion, demat, record clean-up, governance and financial inputs. We then work alongside the merchant banker you appoint. Each side does what it is registered to do, and you always know who is responsible.
What is the minimum application size in an SME IPO?
The minimum application size in an SME IPO is now ₹2 lakh, up from ₹1 lakh earlier. SEBI raised it in the 2025 amendments, so SME issues now reach investors who can take more risk. Your merchant banker fixes the lot size accordingly, and we explain what it means for your investor base.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Merchant banker, exchange, SEBI, depository, registrar and auditor fees are charged by those parties directly. ROC fees apply to conversion and capital changes.
Ready to begin?
Send us your last three years’ audited accounts. Our IPO advisory starts by telling you whether an SME or main-board IPO is within reach and what to fix first.