Sebi flags misuse of SME platform, plans simpler rules for market access | Markets News
Underlining the increasing importance of small and medium-sized enterprise (SME) platforms as “powerful engines” in capital formation, Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey On Wednesday, it was flagged as “egregious examples” of SMEs abusing regulatory relaxations, including diversion of funds and market manipulation.
“These examples have adversely affected investors’ confidence,” Pandey said, adding that Sebi has strengthened the SME framework to ensure that only entities with solid track records are allowed to access public markets.
Speaking at the India SME Finance and Investment Summit, Pandey said the regulator has comprehensively reviewed the Listing Obligations and Disclosure Requirements (LODR) Regulations to remove redundancy and ambiguity. Regulatory and disclosure norms applicable to SMEs are also being examined to improve the ease of doing business while maintaining appropriate investor protection measures.
Pandey said local capital markets will have to play a much larger role in financing SMEs even as the regulator tightens oversight following cases of fraud to protect investors.
“SMEs will need a stack of financing – bank loans for working capital, equity for growth and market-based debt for scale,” he said, adding that governance standards, disclosures and credibility will determine how effectively SMEs can tap capital markets.
As part of its efforts to simplify compliance and increase transparency, Sebi plans to launch a dedicated SME portal in collaboration with stock exchanges. The proposed platform will act as a one-stop digital gateway for issuer information and provide clearly mapped guidance on compliance requirements.
The aim of the initiative is to increase the ease of doing business for SMEs while maintaining strong investor protection.
Pandey also emphasized that India will need sustainable investments in infrastructure, energy transition, housing, services and urban development in the next two decades, and this cannot be financed through the banking system alone.
Fundraising through the SME segment remained strong, with 241 SME IPOs raising ₹9,800 crore in FY25 and 232 IPOs raising ₹10,500 crore in FY26 to January 31.
He said exchanges are increasing due diligence by building deeper relationships with merchant bankers and promoters, conducting site visits to issuers and related entities, and using technology, including artificial intelligence, to review offering documents and shorten approval times.
Pandey said 1,400 companies are listed on private SME exchanges and their collective market capitalization is ₹4.1 trillion. He added that more than 350 of these organizations have moved to the main board of directors. Pandey also noted that an SME raising debt through the stock market is a welcome example.
However, there is a concentration in issuances from the west, with the region accounting for 44 per cent of IPOs in FY26, Pandey said, underlining the need for deeper outreach beyond traditional hubs to broaden the participation of quality SMEs.
“Stock exchanges and industry bodies are already running such structured support programs for listing SMEs. But they need to do more to prepare and attract SMEs to the capital markets,” he added.
Sebi’s ongoing plans to open offices in state capitals will also help facilitate easier access to information regarding listing and post-listing processes, he said.
With inputs from PTI
