Market regulator SEBI on Wednesday approved a strict regulatory framework to strengthen the process of public issues by small and medium enterprises (SMEs). The board also said that reforms were approved to promote ease of doing business for debenture trustees, ESG rating providers, InvITs, REITs and SM REITs. Apart from this, the regulator has decided to make changes in investment banking norms, according to PTI news.
Will have to show operational profit of Rs 1 crore
According to the news, with regard to SME IPOs, SEBI said that SMEs planning to launch an IPO must have an operational turnover of at least Rs 1 crore in two of the last three financial years at the time of filing their draft red herring prospectus (DRHP). Profit (earnings before interest, depreciation and tax – EBITDA) has to be shown. The reforms approved by SEBI’s board are aimed at providing SMEs with a good track record and an opportunity to raise funds from the public while protecting the interests of investors.
SEBI increased its surveillance on SME Board in the last two years
SEBI whole-time member Ashwini Bhatia had said a day earlier that there is a need to stop excessive excitement, price manipulation or fraudulent business practices during the IPO listing of SMEs. Bhatia had said that SEBI has increased its surveillance on the SME Board in the last two years after some worrying aspects came to light. These include companies that misrepresent facts, making it difficult for retail investors to assess their true value and viability.
Amendment in mutual fund rules
SEBI has recently amended mutual fund rules and introduced new investment products. Under this, a liberalized ‘Mutual Fund Lite’ framework has been introduced under the schemes comprising index and exchange traded funds along with specialized investment funds for high risk appetite investors. SEBI said a minimum investment of Rs 10 lakh per investor can be made in all investment strategies of the new product in the respective asset management company (AMC). This does not include accredited investors.
