In a significant move aimed at ensuring only financially strong and compliant small and medium enterprises (SMEs) shift to the main board, the National Stock Exchange (NSE) has revised the eligibility guidelines on April 24. These changes are expected to enhance investor confidence, encourage corporate governance, and prevent companies with weak fundamentals from entering the main board prematurely.

Key Requirement: Minimum Three Years on SME Platform

The first and most notable update from the NSE mandates that an SME company must be listed on the SME platform for a minimum of 3 years before applying for migration. This is a shift from the earlier norm where companies could apply in less than three years in some cases. This move ensures that only companies with proven performance and compliance history over a sustained period can apply.

Paid-Up Capital Must Be ₹10 Crore

According to the revised criteria, the paid-up equity capital of the company must be at least ₹10 crore for it to be eligible for listing on the main board. This change raises the financial bar and ensures that only adequately capitalised companies make the transition.

Promoter Holding Criteria Strengthened

To maintain accountability and confidence among investors, NSE has made it compulsory for:

• Promoters and Promoter Group to collectively hold at least 20% at the time of the application.

• Furthermore, promoters must retain at least 50% of the shares they held at the time of the SME listing.

This provision is intended to ensure that promoters have enough skin in the game, reducing risks for public investors.

Net Worth Requirement Raised to ₹75 Crore

In another major shift, the NSE now requires that the applicant company must have a net worth of at least ₹75 crore. This is aimed at allowing only financially sound companies with robust operations and stability to graduate from the SME platform to the main board.

Strict Regulatory and Legal Compliance Prerequisites

To ensure only clean and compliant entities are considered for migration, the NSE has also included the following mandatory conditions:

• No proceedings under the Insolvency and Bankruptcy Code (IBC) should be admitted against the applicant company or its promoter.

• There should be no admitted winding-up petitions by the National Company Law Tribunal (NCLT) or under the IBC.

• No material regulatory actions such as suspension of trading should have occurred against the company or its promoter in the past three years.

• Neither the company nor its promoter/subsidiaries should be debarred by SEBI.

• No disqualification or debarment of directors by any regulatory authority.

• No pending investor complaints should exist in the SCORES (SEBI Complaints Redress System) portal.

These conditions ensure that companies applying for migration uphold high standards of governance and transparency.

Impact on the SME Ecosystem

These revised norms will likely impact the plans of several SME companies aiming for a quick shift to the main board. While some companies may need additional time or capital restructuring to meet these new thresholds, investor sentiment may improve as only genuine and well-run enterprises will now make the cut.

Experts believe that long-term this move will boost market confidence, improve the quality of mainboard-listed companies, and enhance liquidity by building trust in SME-originated stocks.

Why NSE’s Move Matters Now

In recent years, the SME segment has seen increased retail investor participation, with many companies achieving multibagger returns post listing. However, concerns have also grown around governance issues, poor liquidity, and speculative stock price movements. This has led to calls for tighter oversight and filtering mechanisms.

The NSE’s new framework seems like a timely intervention to safeguard the interests of investors while ensuring only mature SMEs graduate to the main board.

Conclusion

The revised migration guidelines from NSE will likely serve as a strong filter for quality and compliance, ensuring that only financially robust, well-governed, and investor-friendly companies reach the main board. These changes set a higher benchmark for growth-oriented SMEs and align with the broader objective of strengthening India’s capital markets.

Companies currently listed on the SME platform aspiring to scale must now re-evaluate their compliance, governance structures, and capital adequacy before initiating the migration process.

The Upcoming IPOs in this week and coming weeks are Ather Energy.

The Current active IPO are Tankup Engineers.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.