Introduction

SEBI has amended the ICDR Regulations, 2018, with effect from 16 March 2026, addressing key gaps in the IPO framework. The amendments primarily focus on :

(i) strengthening the enforceability of lock-in provisions in respect of pledged shares, and (ii) improving the timing and accessibility of abridged prospectus disclosures.

1. The Lock-in Challenge

1.1 Lock-in requirements are central to maintaining discipline in capital raising. However, under the earlier framework, a practical limitation existed. When shares were pledged, the depository system did not have the capability to technically enforce transfer restrictions.

This created a situation where:

• Lock-in obligations existed in law
• But their enforcement depended on contractual arrangements
• And in certain cases, pledge-related events introduced ambiguity

In essence, there was a disconnect between regulatory intent and system capability.

1.2 SEBI has now addressed this gap by introducing a clear mechanism within Regulation 17 of ICDR.

Under the revised framework:

• The issuer is empowered to instruct the depository to restrict transfer of shares subject to lock-in[i]
• The depository marks such shares as non-transferable at a system level
• This restriction operates irrespective of whether the shares are pledged

Importantly, even where:

• the pledge is invoked, or
• the pledged shares are released

the lock-in restriction continues uninterrupted for the entire prescribed period.

This marks a significant shift from contractual enforcement to technological enforcement, ensuring that the lock-in requirement is not merely theoretical but operationally binding.

1.3 Impact on the stakeholders

The amendment ensures that lock-in is now enforced directly through the depository system, making shares non-transferable even if they are pledged. As a result, issuers, depositories, and intermediaries need to coordinate to implement and monitor this properly, lenders will have limited flexibility in dealing with pledged shares during the lock-in period, and advisors must carefully structure and review such transactions under this stricter and clearly enforceable framework.

2. Reworking the Abridged Prospectus: From Late Disclosure to Early Insight

2.1 The second major reform relates to investor disclosures.

Earlier, the abridged prospectus was intended to provide a concise snapshot of the offer. It was made available only at the application stage. By that point, investors had already navigated the decision-making process, often relying on lengthy and complex offer documents.

This approach limited the effectiveness of the abridged prospectus as a decision-support tool.

2.2 The revised framework fundamentally repositions the role of the abridged prospectus.

Now:

• A Draft Abridged Prospectus (DAP) is required to be prepared and filed along with the DRHP[ii]
• It follows a standardised structure, ensuring uniformity across issuers[iii]

Further, the mode of dissemination has been modernised:

• Physical copies are replaced with QR codes and hyperlinks[iv]
• Application forms act as access points, not carriers of documents

2.3 Standardisation of Disclosure : A Structured Investor Summary

The amendment introduces a clearly defined 12 part  structure for the abridged prospectus, requiring disclosure of key investor-relevant information, including:

• Overview of the issue and business
• Industry summary
• Promoter details
• Objects of the issue
• Pre- and post-issue shareholding
• Financial highlights
• Key performance indicators
• Top risk factors
• Cost of acquisition
• Board and KMP details
• Auditor qualifications
• Outstanding litigations

Additionally, disclosures relating to Contingent Liabilities and Related Party Transactions[v] are now elevated as standalone sections in the offer document, indicating a shift in regulatory emphasis.

2.4 Before and After : A Structural Comparison

Lock-in Framework

Abridged Prospectus Framework

2.5 Impact of the amendment

The introduction of the Draft Abridged Prospectus (DAP) impacts issuers, merchant bankers, and legal advisors, as it becomes a mandatory part of the DRHP filing process and must be prepared in a standardised format at an earlier stage. For companies that have already filed their DRHP prior to the amendment, the requirement would generally apply at the stage of updating or refiling the DRHP/RHP, meaning they may need to prepare and align the DAP before proceeding further in the issue process. From an implementation perspective, while QR code–based access simplifies investor outreach, practical challenges may arise in ensuring correct linkage, version control (especially when documents are updated), seamless accessibility across devices, and maintaining consistency between the DRHP, abridged prospectus, and linked disclosures, thereby requiring careful coordination and verification before circulation.[vi]

Conclusion

The 2026 amendments reflect a clear regulatory direction, the one that prioritises enforceability and accessibility.

On one hand, SEBI has ensured that lock-in provisions are backed by system-level controls, eliminating operational loopholes. On the other, it has transformed the abridged prospectus from a procedural requirement into a meaningful disclosure tool.

Together, these changes signal a move towards a more integrated, technology-driven and investor-focused IPO framework; where compliance is not only mandated, but effectively delivered.

[i] Regulation 17 (2) of ICDR: Subject to sub-regulation (1), where lock-in of the specified securities cannot be created, the depositories shall, upon receipt of instructions from the issuer, record such securities as “non-transferable” for the duration of the applicable lock-in period

[ii] Regulation 25(2) of ICDR The lead manager(s) shall submit the following to the Board along with the draft offer document:

…

(d) a draft abridged prospectus as per Part E of Schedule VI.

…

[iii] Schedule VI, Part E, of ICDR Regulations

[iv] Regulation 34(2), 131(2), 255(2), Schedule VI, Part E (VI), of ICDR Regulations

[v] Schedule VI, Part A, Clause (6), ICDR Regulations

The post SEBI ICDR Amendments, 2026 first appeared on MMJC.

India’s capital markets have evolved significantly over the last decade. IPO sizes have grown larger, valuations have increased sharply, and several companies now reach market capitalisations that were once seen only in global markets.

Against this backdrop, the Government has amended the Securities Contracts (Regulation) Rules, 1957 (SCRR) through the Securities Contracts (Regulation) Amendment Rules, 2026, notified on 13 March 2026, effective on the date of their publication in the Official Gazette.

The amendment revises Rule 19(2)(b), which prescribes the minimum offer and allotment to the public required for listing on a recognised stock exchange.

While the earlier framework applied a relatively simple threshold, the amended rule introduces a graduated public offer structure based on the size of the company’s post-issue capital. The change reflects the realities of modern capital markets and is particularly relevant for large and mega IPOs.

The Earlier Framework

Before this amendment, the listing requirement under Rule 19[1] of SCRR broadly required the following:

• At least 25% of each class of equity shares to be offered to the public; or
• At least 10% public offer, where the post-issue capital exceeded ₹4,000 crore, subject to the condition that the company would increase public shareholding to 25% within three years of listing.

This framework worked reasonably well when most IPOs were within a few thousand crore rupees. However, with the emergence of very large companies, the rule sometimes resulted in extremely large issue sizes simply to satisfy regulatory thresholds.

What the 2026 Amendment Introduces

The 2026 amendment replaces the earlier simplified framework with a tiered structure linked to the company’s post-issue capital.

Under the amended Rule 19(2)(b), the minimum public offer requirement now varies depending on the size of the company.

Revised Public Offer Requirements

The amendment therefore recognises that very large companies may not need to dilute a large percentage of equity at the time of listing, while still ensuring that a meaningful amount of shares are available in the market.

Gradual Increase in Public Shareholding

Even though companies may list with a lower public float under this framework, the law continues to require companies to increase public shareholding over time.

This ensures that market liquidity and investor participation are maintained in the long run.

Practical Impact on Companies

The amendment is likely to have several practical implications for companies planning to go public.

1. Listing of large companies made easier:

For companies with very large valuations, the earlier public float framework often resulted in IPO sizes far exceeding realistic market absorption levels. Using LIC’s IPO as a reference point, a company valued at about ₹6 lakh crore would have required an issue size of nearly ₹60,000 crore if a 10% public float were mandated, which would have been difficult for the market to absorb in one transaction. The amended Rule 19 now addresses this challenge by allowing such companies to list with a minimum public offer of ₹15,000 crore and at least 1% equity, instead of a fixed percentage threshold. By introducing this value-based threshold, the amendment enables large companies to access public markets without forcing excessively large IPO sizes, while still ensuring gradual compliance with minimum public shareholding norms.

2. Greater flexibility in IPO structuring

Earlier, companies sometimes had to increase issue size simply to meet the regulatory percentage requirement.

Under the new framework, companies may be able to design more efficient IPO structures, where the issue size reflects:

• capital requirements of the company; and
• market conditions at the time of listing.

This may also allow promoters to phase dilution through future transactions, such as:

• Offer for Sale (OFS)
• Qualified Institutional Placement (QIP)
• Follow-on public offers.

3. Potential increase in large IPOs

The amendment could encourage large private companies and unicorn-stage companies to consider listing in India.

For many high-valuation companies, offering 25% at listing could translate into extremely large IPO sizes. The new framework reduces this barrier and may therefore make the Indian market more attractive for mega listings.

4. Extra Time for MPS Compliance, But Past Defaults Still Liable

Companies already listed and which were unable to achieve the prescribed minimum public shareholding (MPS) may avail the benefit of the revised timelines under the Securities Contracts (Regulation) Amendment Rules, 2026 to regularise their MPS; however, such relaxation does not absolve past non-compliances, and the stock exchanges retain the authority to impose fines or penalties for breaches occurring prior to the commencement of the amended rules.

Conclusion

The SCRR Amendment Rules, 2026 represent an important step in modernising India’s listing framework.

By introducing a graduated public offer structure, the amendment recognises the changing scale of Indian companies and the evolving nature of the IPO market.

For companies planning to list, the amendment offers greater flexibility in structuring IPOs and managing promoter dilution. For the market as a whole, it may facilitate more large-scale listings in India, while continuing to ensure sufficient public participation over time. In that sense, the amendment reflects a broader policy objective of making India a more attractive destination for large and global-scale IPOs while maintaining strong market integrity

[1] Rule 19(2) of SCRR

 (b) (i) At least twenty five per cent. of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document; or

(ii) At least ten per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than four thousand crore rupees:

Provided that the requirement of post issue capital being more than four thousand crore rupees shall not apply to a company whose draft offer document is pending with the Securities and Exchange Board of India on or before the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, if it satisfies the conditions prescribed in clause

(b) of sub-rule 2 of rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed prior to the date of such commencement:

Provided further that the company, referred to in sub clause (ii), shall increase its public shareholding to at least twenty five per cent, within a period of three years from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India.

(c) Notwithstanding anything contained in clause (b), a public sector company, shall offer and allot at least ten per cent, of each class or kind of equity shares or debentures convertible into equity shares to public in terms of an offer document.

This article is published on the taxguru link below.

https://taxguru.in/corporate-law/scrr-rule-19-amendment-means-large-ipos.html#:~:text=Listing%20of%20large%20companies%20made%20easier%3A&text=The%20amended%20Rule%2019%20now,of%20a%20fixed%20percentage%20threshold.

The post Big IPOs Just Got Easier: Understanding the 2026 Amendment to SCRR Rule 19 and Its Impact on the Indian IPO Market first appeared on MMJC.

Introduction

When a company decides to go public, attention usually gravitates towards valuation, timing, and market conditions. Yet, one of the most fundamental and often under-appreciated decisions in an IPO is this-

Should the issue be a Fresh Issue, an Offer for Sale (OFS), or a combination of both?

This choice is not merely technical. It influences how investors perceive the IPO, how regulators scrutinise disclosures, and how the company’s post-listing journey unfolds. For promoters-especially those approaching the capital markets for the first time-understanding this distinction is essential.

Understanding the two routes: same IPO, different outcomes

An IPO can broadly be structured in two ways.

1. Fresh Issue:

A Fresh Issue involves the company issuing new equity shares to the public. The proceeds from the IPO flow into the company, increasing its paid-up share capital. This route is typically associated with growth viz. funding expansion plans, repaying borrowings, meeting regulatory capital requirements, or strengthening the balance sheet.

2. Offer for Sale:

An Offer for Sale, on the other hand, involves existing shareholders selling their shares to the public. No new shares are created. The company does not receive any funds; instead, the proceeds go directly to the selling shareholders viz. usually promoters, private equity funds, or early investors.

While both structures result in listing, the economic substance of each is quite different.

Who needs the money decides mode of IPO

The most effective way to think about this decision is to ask a simple but honest question:

Does the business need capital, or do the shareholders need liquidity?

If the company is entering a phase where it requires funds for growth, capacity expansion, acquisitions, or debt reduction, a Fresh Issue becomes a natural choice. Investors generally view such IPOs positively, provided the use of funds is clearly articulated and commercially sound. Dilution of promoter shareholding is seen as acceptable when it is tied to future value creation.

However, empirical IPO data tells a more nuanced story.

Between December 2024 and January 2026, covering 103 Mainboard IPOs and 294 SME IPOs, the following pattern emerges:

Table 1: Details of IPOs between December 202 to January 2026

This means that over 90% of IPOs across both segments adopted a combined structure, and pure Fresh Issue IPOs were virtually absent, especially on the Mainboard.

Conversely, if the business is already generating sufficient internal cash flows and does not require external capital, an OFS may be appropriate. This is particularly common where early investors are nearing exit timelines or where promoters seek partial monetisation after years of value building.

However, perception plays a critical role. An IPO that is largely or entirely an OFS can sometimes be viewed as an “exit IPO” unless the company’s fundamentals and growth prospects are strong enough to counter that narrative.

Growth story versus exit optics

Every IPO, intentionally or otherwise, tells a story.

A Fresh Issue-heavy IPO signals that the company is focused on scaling operations and investing in the future. An OFS-heavy IPO signals that existing shareholders are unlocking value. Neither is inherently good or bad, but each sends a different message to the market.

This is why many well-received IPOs adopt a balanced structure, combining a Fresh Issue with a partial OFS. Such a structure allows the company to raise growth capital while also providing liquidity to early risk-takers, without appearing promoter-driven or speculative.

Regulatory considerations quietly shaping the structure

Another factor that often drives OFS decisions is compliance with minimum public shareholding norms. Promoter holdings in unlisted companies are frequently well above post-listing thresholds. In such cases, an OFS is not a matter of choice but necessity, aimed at achieving regulatory compliance rather than facilitating an exit.

Fresh Issues, meanwhile, attract closer regulatory scrutiny. Under the SEBI ICDR Regulations, companies must provide detailed disclosures on the objects of the issue, timelines for utilisation, and in certain cases, ongoing monitoring of fund usage. While this increases compliance burden, it also enhances transparency and investor confidence.

Accountability after listing

Fresh Issue proceeds come with an implicit promise. Post-listing, analysts and investors closely track whether the company deploys funds in line with stated objectives. Deviations, delays, or vague utilisation can impact credibility and stock performance.

OFS structures do not carry this burden, as the company is not receiving funds. This makes OFS administratively simpler but also means the IPO must stand purely on the strength of the existing business.

How promoters should think before finalising the structure

Before locking in the IPO structure, promoters should internally evaluate:

• Whether raising capital today will meaningfully accelerate long-term value creation
• Whether promoter dilution is being undertaken for growth or convenience
• How the IPO structure will be perceived by a first-time public investor
• Whether the company’s story remains compelling even without fresh capital

These questions often matter more than pricing mechanics or short-term market sentiment.

Closing thoughts

There is no standard formula for choosing between a Fresh Issue and an Offer for Sale. The right structure depends on the company’s financial position, growth plans, shareholder objectives, and regulatory landscape.

At its core, the decision is about alignment between the company’s needs, promoter intentions, and investor expectations. IPOs that get this alignment right tend to inspire confidence long after the listing day excitement fades.

For promoters, the objective should not merely be to list, but to list credibly, sustainably, and with a structure that supports the company’s next chapter.

This article is published on the Taxmann link share below. 

https://www.taxmann.com/research/company-and-sebi/top-story/105010000000027806/fresh-issue-or-offer-for-sale-in-an-ipo-how-companies-are-choosing-to-list-experts-opinion

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Introduction

A Letter of Offer (LOF) is often seen as a transaction-specific document prepared to meet the procedural requirements of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations). In practice, however, SEBI also treats the LOF as a document that must reflect complete regulatory truth.

Several adjudication orders show a consistent regulatory approach. SEBI uses the examination of the LOF to look back and identify past non-compliances, missed disclosures, and governance failures, even if these occurred many years earlier and were not questioned at the time.

The following four cases show how SEBI, while reviewing offer-related documents or trading activity, reconstructed historical conduct and imposed liability. Taken together, they explain why the sellers/ existing promoters of the Target Company must treat LOF diligence as a backward-looking compliance review, and not merely as a forward-looking disclosure exercise.

Case Studies

Case Study 1: Emkay Consultants Limited[1]

Missed open-offer triggers identified retrospectively

In this case, SEBI reviewed historical movements in shareholding of promoters and persons acting in concert over a period of several months. SEBI found that:

• Promoters were reclassified from public shareholders
• Multiple acquisitions crossed statutory thresholds
• Five separate open-offer triggers arose under Regulations 3(1), 3(2) of the SAST Regulations and Regulation 31A(5) of the SEBI LODR Regulations
• No open offer was made on any of these occasions

These violations were identified much later, and not at the time when the transactions actually occurred. SEBI rejected arguments relating to lack of trading activity, defunct stock exchange operations, or absence of investor harm.

Relevance to LOF:

This case shows that historical trigger events remain enforceable, and past failures can surface during later regulatory scrutiny.

Case Study 2: Mediaone Global Entertainment Limited[2]

Incorrect disclosures caused by outdated due diligence

In this matter, the merchant banker acted as the manager to the open offer. SEBI found that:

• The ownership of the foreign acquirer had changed before filing the Draft Letter of Offer (DLOF)
• The change was publicly available in records of the UK Companies House
• The merchant banker relied on earlier due diligence and representations made by the acquirer
• A due diligence certificate was issued stating that disclosures were “true and adequate”

SEBI held that the merchant banker failed to refresh its due diligence before filing the DLOF and LOF, and therefore certified disclosures that were factually incorrect.

Relevance to LOF:

SEBI clearly stated that due diligence is a continuing obligation, and reliance on client information does not remove the merchant banker’s duty to independently verify facts.

Case Study 3: Vinny Overseas Limited[3]

Persons acting in concert identified through trading behaviour

In Vinny Overseas, several individuals and entities acquired shares through market trades. SEBI observed that:

• Individually, the shareholdings appeared insignificant
• Collectively, the shareholding crossed the 5% threshold on multiple occasions
• No disclosures were made under Regulation 29 of the SAST Regulations

SEBI established the existence of persons acting in concert (PAC) based on:

• Family relationships
• Common promoters and directors
• Use of common IP and MAC addresses for trading
• Coordinated timing and pattern of acquisitions

Even though there were no formal agreements, SEBI held that concert could be inferred from conduct.

Relevance to LOF:

This case shows that historical accumulation patterns may later be treated as concerted acquisitions, raising issues of control and disclosure during examination of offer documents.

Case Study 4: Eiko Lifesciences Limited[4]

Historical non-compliance identified during LOF review

In this case, while examining the Draft Letter of Offer, SEBI identified alleged violations relating to non-disclosure of encumbrances on promoter shareholding under Regulation 31 of the SAST Regulations. These related to pledge and unpledge transactions that occurred before a later regulatory amendment exempted certain depository-level pledges from disclosure.

The noticee argued that the pledges were routine margin pledges created within the depository system and relied on later regulatory understanding to justify non-disclosure. SEBI rejected this argument, noting that at the time the transactions took place, no such exemption existed and the disclosure requirement under Regulation 31 of SAST Regulations  was fully applicable.

SEBI clarified that during LOF scrutiny, past transactions are examined based on the regulatory framework applicable at the relevant time. Later amendments or evolved interpretations cannot be used to retrospectively cure earlier non-compliance. As a result, historical disclosure failures may come to light and be adjudicated only because an LOF is filed, even when the offer transaction itself is otherwise compliant.

Relevance to LOF:

Interpretive positions must be clearly explained and consistently applied, failing which SEBI may treat omissions as disclosure failures.

Conclusion

Taken together, these four cases send a clear regulatory message. SEBI treats the LOF as a window into the company’s past, and not merely as a document for the current transaction.

For merchant bankers, existing promoters and the sellers, the implications are clear:

• Past missed triggers, disclosure lapses, and control-building patterns do not disappear with time
• Due diligence must reconstruct historical conduct, not just verify present facts
• PAC analysis must go beyond declarations and examine relationships and behaviour
• Interpretive compliance positions must be transparent, consistent, and defensible

In essence, LOF preparation is not a procedural formality. It is a regulatory audit of historical conduct. If past non-compliances are not disclosed in the offer document, SEBI may identify them during scrutiny

[1] https://www.sebi.gov.in/enforcement/orders/nov-2025/adjudication-order-in-the-matter-of-emkay-consultants-limited_97949.html

[2] https://www.sebi.gov.in/enforcement/orders/nov-2025/adjudication-order-in-the-matter-of-mediaone-global-entertainment-limited_97673.html

[3] https://www.sebi.gov.in/enforcement/orders/oct-2025/adjudication-order-in-the-matter-of-investigation-in-the-trading-activities-of-certain-entities-in-the-scrip-of-vinny-overseas-ltd-_97493.html

[4] https://www.sebi.gov.in/enforcement/orders/jan-2026/adjudication-order-in-the-matter-of-eiko-lifesciences-limited_98889.html

The post SEBI’s Letter of Offer Scrutiny: Why past non-compliances surface during offer document review first appeared on MMJC.

When we think of IPOs, we usually picture big brands making headlines on business news channels. But beyond the main board, there’s another fast-growing segment quietly raising capital SME IPOs. These are small and medium enterprises listing on special SME platforms of stock exchanges like NSE Emerge and BSE SME.

SME IPOs are meant to give smaller companies access to public funds while still following the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations). Over the years, this route has become popular among companies looking for visibility, credibility, and growth capital.

However, SEBI has recently noticed that some SME IPOs were coming to market without a solid profit track record. Investors often found it hard to judge their sustainability, and post-listing performance was uneven. To fix this, SEBI has introduced a new profitability test for SME IPOs in 2025. Let’s break this down in plain language.

What Has Changed?

Under the March 2025 amendment to the ICDR Regulations, an SME company must now show that it has earned an operating profit (EBITDA) of at least ₹1 crore in any two of the last three financial years before filing its Draft Red Herring Prospectus (DRHP)[1].

In simple words if a company wants to go for an SME IPO, it should be able to demonstrate that it’s not just growing on paper but actually making money through operations in at least two recent years. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is a measure of operating profit it tells us whether the business model is working before accounting for financing or depreciation costs.

Why Did SEBI Bring This Change?

The goal is simple: to improve quality and investor confidence.

Earlier, even companies with weak or inconsistent profits could attempt IPOs. Some raised funds only to meet working capital needs or repay loans, without a strong business story. As a result, a few IPOs struggled after listing, and investor trust began to dip. By introducing this profitability filter, SEBI wants to ensure that only those SMEs that have proven stability and a minimum earning capacity can tap public money[2]. This also protects small investors who might otherwise be drawn to every “new issue” without understanding the risks.

Why the Profitability Filter Was Necessary: Market Trends and Fundraising Realities

The timing of SEBI’s new profitability requirement becomes clearer when viewed against current market behaviour. While the broader primary market has moderate i.e. raising about US $14 billion so far in 2025 compared to US $19 billion in 2024 still SME fundraising continues to surge[3]. By November 2025, SMEs had already raised ₹9,165 crore, marking one of the strongest years ever for small-company listings. Yet, despite the volume, listing-day gains have cooled significantly; average gains across 2025 SME IPOs hover around 10%, far below the highs seen in previous years. This divergence reflects a deeper issue: strong SMEs continue to perform, but early-stage or thin-margin businesses often struggle after listing, affecting investor trust and long-term market stability.

Seen in this backdrop, SEBI’s ₹1-crore EBITDA test serves not as a hurdle but as a quality badge for genuine SMEs. Companies with consistent operating profitability will stand out, command better valuations, and attract more institutional and long-term investors. The rule also nudges the ecosystem toward discipline. Over time, this filter will reduce speculative listings, improve post-listing performance, and elevate SME platforms closer to main-board credibility, ensuring that the right companies shine brighter in India’s evolving capital markets.

Conclusion

The SME platform remains one of India’s most exciting capital-raising avenues. SEBI’s new profitability test is not meant to discourage small companies but to help the right ones shine brighter. Every amendment carries a story in this case, a story of making SME IPOs safer, cleaner, and more trustworthy.

[1] Regulation 229 (6) of ICDR Regulations: An issuer may make an initial public offer, only if the issuer had minimum operating profits (earnings before interest, depreciation and tax) of ₹1 crore from operations for at least two out of the three previous financial years.]

[2] https://www.sebi.gov.in/reports-and-statistics/reports/nov-2024/consultation-paper-on-review-of-sme-segment-framework-under-sebi-icdr-regulations-2018-and-applicability-of-corporate-governance-provisions-under-sebi-lodr-regulations-2015-on-sme-companies-to-_88627.html

[3] Data from Kotak Institutional Equtiy’s Primary Market Report (October 19, 2025)

This has been published on taxguru.

https://taxguru.in/sebi/sme-ipo-rules-2025-sebis-rs-1-crore-ebitda-test-explained-icdr.html

The post SME IPO Rules 2025: SEBI’s New ₹1-Crore EBITDA Test Explained (ICDR) first appeared on MMJC.

Introduction

When Piramal Finance Limited (PFL) appeared on the stock exchanges without launching an IPO, it seemed unconventional at first glance. Yet, the move was entirely within the legal and regulatory framework. The merger between Piramal Enterprises Limited (PEL) and PFL, sanctioned by the National Company Law Tribunal (NCLT), Mumbai Bench, demonstrates how India’s company law and financial-sector regulation can work in tandem to achieve compliance-driven outcomes.

The Regulatory Compulsion Behind the Merger

The starting point was the Reserve Bank of India’s Scale-Based Regulatory Framework for NBFCs. In April 2025, PFL’s licence was converted from a Housing Finance Company (HFC) into a Non-Banking Financial Company-Investment and Credit Company (NBFC-ICC). RBI approved this conversion with two critical conditions:

• Only one entity within the Piramal Group could hold an NBFC-ICC licence, and
• The NBFC-ICC in the group had to be listed by 30 September 2025 as mandated for upper-layer NBFCs.

At that time, both PEL and PFL were registered NBFCs. Maintaining two NBFC-ICC licences was impermissible, and a fresh IPO by PFL within the RBI deadline was impractical. The solution was a composite scheme of arrangement that consolidated the lending business and fulfilled RBI’s mandate through a controlled restructuring route.

The Structure: PEL Merges into PFL

Under the approved scheme by NCLT-Mumbai, the listed parent company, PEL, amalgamated with its wholly owned subsidiary, PFL. Upon the scheme taking effect, PFL became the surviving entity. This reorganisation was both logical and efficient. PFL already carried the group’s lending operations, loan book, branch network and employees. The merger unified the businesses under one platform, removed duplication in compliance and governance, and brought the actual operating company under direct market supervision which was the precise intent of the RBI’s policy. But as the merger happened PEL become united as PFL was unlisted. How?

The Section 232(3)(h) Challenge and How It Was Resolved

A critical legal hurdle lay in Section 232(3)(h) of the Companies Act, 2013. The provision governs mergers where a listed company merges into an unlisted one, and it imposes a strict condition: the transferee (unlisted) company must remain unlisted unless and until it becomes listed, and shareholders of the transferor (listed) company must be given an exit option.

This meant that even though PEL (listed) was merging into PFL (unlisted), PFL could not automatically become listed as a result of the merger. It had to remain unlisted until it independently met the listing requirements and received stock-exchange and SEBI permissions.

The Piramal Group resolved this sequencing challenge with precision.

• On 23 September 2025, trading in PEL’s shares was suspended in accordance with stock-exchange guidelines and after NCLT approval.
• PEL shareholders were then allotted PFL shares in a 1:1 ratio as provided in the sanctioned scheme.
• At this stage, PFL, though the surviving company, remained unlisted, complying fully with Section 232(3)(h).

After completing all statutory formalities and all regulatory clearances were secured, PFL was directly listed on 7 November 2025.

Implications and Emerging Practice

The merger’s design sets a precedent for other large NBFCs that fall within the RBI’s upper-layer framework. Entities such as Aditya Birla Finance have already announced similar consolidations to comply with the same deadline. For conglomerates with multiple regulated subsidiaries, this method offers certainty, speed and cost efficiency.

From a regulatory standpoint, the result aligns perfectly with the policy intent: large financial institutions are brought under market scrutiny and disclosure norms without congesting the IPO pipeline. For investors, it provides direct ownership in the operating company with no dilution of rights or transparency.

Conclusion: A Shift in India’s Listing Architecture

The Piramal merger marks an evolution in India’s approach to listings. It demonstrates that a company can become listed not only by raising public funds but also through statutory consolidation when public shareholders already exist. As more large NBFCs restructure under RBI’s framework, “listing by arrangement” is set to become an accepted route. The one that balances corporate necessity with investor protection and regulatory oversight. The merger thus stands as an example of how India’s corporate-law architecture can adapt to regulatory imperatives while maintaining transparency and legal integrity.

This article is published on the TaxGuru; the link is shared below.

https://taxguru.in/corporate-law/listing-ipo-piramal-finance-piramal-enterprises-merger.html

The post A Listing Without an IPO:Piramal Finance and Piramal Enterprises Merger first appeared on MMJC.