Context:
The National Stock Exchange (NSE) has revised its eligibility criteria for small and medium enterprises (SMEs) wishing to migrate to the mainboard, effective May 1 2025. These updated guidelines come in response to growing concerns about the governance and financial practices of SMEs, following recent scrutiny by the Securities and Exchange Board of India (SEBI).
New Eligibility Requirements:
- Revenue Threshold: SMEs must have a minimum revenue of ₹100 crore in the previous financial year.
- Profitability: Firms must demonstrate positive operating profit for at least two out of the last three financial years.
- Market Capitalisation: The company’s average market capitalisation should not be less than ₹100 crore at the time of migration.
- Promoter Holding: The promoters and promoter group must hold at least 50% of the shares they held at the time of listing when applying for migration.
- Public Shareholding: The company must have 500 public shareholders.
Additional Requirements:
- Financial Standing: SMEs must have no defaults in payment of interest or principal on debentures, bonds, or fixed deposits.
- Regulatory Standing: The company must not have faced any material regulatory actions in the last three years, such as suspension of trading or legal actions against the promoters.
Recent Context:
- The SEBI crackdown on irregularities such as fund diversion, manipulation in financials, and fictitious transactions led to a tightening of regulations for SMEs.
- The migration process allows SMEs to move from the NSE Emerge platform to the mainboard after meeting these criteria.
Migration Data:
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- 142 companies have migrated from the NSE Emerge portal to the mainboard so far.
- As of February 2025, ₹16,587 crore has been raised by 605 SMEs listed on the platform since 2012.
- A significant portion of capital raised, 40%, came from retail individual investors (RIIs) in February 2025.
The NSE has raised the bar for SMEs looking to migrate to the mainboard, with stricter financial and governance standards. These measures are aimed at improving transparency and ensuring that only well-managed firms make the transition to the mainboard. The revised guidelines will ensure greater scrutiny and enhance investor confidence in the SME sector.
