पाठशाला Pathshala · धन Dhan, Money · Lesson 30 · Scale

The IPO path in India: SME board, mainboard and the preparation

An Indian listing has two doors, each with its own tests. Learn which one your numbers open, and start the three years of governance, accounts and cap-table work a prospectus demands.

Pathshala, The Founder Library · 11 October 2026 · 6 min read

Fishing boats on the water in front of the Mumbai skyline. — Photograph: Asif pav · Pexels

A company does not decide to list in the year it lists. It decides three years earlier, when it chooses its auditors, its board and the shape of its cap table. By the time a banker is hired the company is either ready or it is three years away.

This lesson sets out the two Indian public markets for a growing company, the tests each applies, a figure to check which door your numbers open, the 2025 tightening of the SME platform, the three years of preparation and what listing changes for founders and investors.

Two boards, two different companies

The SME platforms, NSE Emerge and BSE SME, were built for small companies raising modest amounts from a narrower set of investors. SEBI’s issue rules reserve them for companies whose post-issue paid-up capital is ₹10 crore or less and allow those between ₹10 crore and ₹25 crore to use them too, as a 2025 guide by Corporate Professionals summarises; each exchange then adds tests of its own, such as net tangible assets of ₹3 crore in the last year for NSE Emerge and net worth of ₹1 crore in each of the two preceding years for BSE SME. Paid-up capital means face value, not valuation, so a company valued at hundreds of crores can still fit.

The mainboard of NSE and BSE is where institutional investors, index funds and most retail money sit. It has two doors, and choosing between them is the first question of any listing plan.

The mainboard tests: profit route or institutional route

Regulation 6(1) of SEBI’s issue rules, as summarised by TaxGuru, admits a company with net tangible assets of at least ₹3 crore in each of the preceding three full years (with no more than half in monetary assets unless committed to the business), average pre-tax operating profit of at least ₹15 crore over those three years, and net worth of at least ₹1 crore in each of them. A company that fails any of these can list under Regulation 6(2) through a book-built issue in which at least three quarters of the net offer is allotted to qualified institutional buyers; if it cannot allot that much, it must refund the money.

The 6(2) route is how a company that is still investing in growth reaches the public market, and the condition is the point: institutions, not retail investors, price the risk. It also means the company is sold to the investors who will read the prospectus most sceptically and hold it to the forecasts. Either route requires the promoters to hold at least twenty per cent of the post-issue capital, locked in for at least eighteen months, with alternative investment funds and some other institutions allowed to make up part of a shortfall.

Check your route

Enter three years of operating profit as your auditors would restate it, the lowest net tangible assets and net worth across those years, and the paid-up capital you expect after the issue. The default is a company that turned profitable last year: too large for the SME platform, short of the ₹15 crore average for 6(1), and therefore a 6(2) candidate. Move last year’s profit to ₹50 crore and watch the profit route open, which is why some companies wait a year for a cleaner listing.

The figure shows SEBI’s floor, not the market’s. Bankers will tell you what size of issue, growth and profit history the institutions of the day expect, and that bar is far above the regulation. Use the figure to know which conversation you are in, then ask the bankers the second question.

The SME platform after the 2025 tightening

SEBI tightened the SME framework in amendments notified on 4 March 2025. Agama Law’s summary lists the main changes: operating profit of at least ₹1 crore in any two of the three previous financial years; an offer for sale capped at twenty per cent of the issue, with no selling shareholder selling more than half its holding; general corporate purposes capped at fifteen per cent of the issue or ₹10 crore, whichever is less; no proceeds used to repay loans from promoters or related parties; a draft offer document open for public comment for at least twenty-one days; a minimum application of ₹2 lakh; and main-board rules on related-party transactions. The minimum promoter contribution of twenty per cent stays locked in for three years.

One change runs the other way. Before the amendment a company listed on the SME platform whose paid-up capital grew past ₹25 crore had to migrate to the mainboard; the same summary records that the mandatory migration falls away if the company complies with the mainboard’s listing obligations. A small listed company can therefore grow on the platform, but it will be held to the larger company’s rules as it does.

For a founder these rules change the case for the SME platform. It is a place to raise growth capital from a profitable small business, not an early exit for investors. A company that needs a liquid market for its shareholders or a large raise should plan for the mainboard.

The three years before the prospectus

Year one: the foundations. Appoint auditors the market will accept and have them audit at the standard the offer document will need, because three years of restated accounts will be printed. Close the books monthly within ten days. Build a secretarial record of every allotment, transfer and resolution since incorporation, and fix gaps now, while the people who made them are still around. Map every related-party transaction and end the ones that would embarrass you in print.

A historic building under restoration covered in scaffolding and protective netting. — The facade the public sees on listing day is finished long before. The scaffolding is the three years of accounts and governance behind it. Photograph: Peter Dyllong · Pexels

Year two: the board and the controls. Bring in independent directors with the experience a listed board will need, form the audit, nomination and remuneration, and stakeholder committees the listing rules require, and let them run real meetings for a year. Put internal controls over financial reporting in place and test them. Settle or provision for litigation, because every case is disclosed.

Year three: the cap table and the story. Every convertible instrument has to be fully paid up and converted before the red herring prospectus, under the rule set out in [the structured rounds lesson](/library/structured-rounds-what-headline-valuation-hides), so negotiate conversion terms with investors early. Decide who will be named as promoters, since they carry the lock-in and the disclosure. Check founder options: SEBI’s board decided in June 2025 that founders classified as promoters may keep stock options granted at least a year before the draft prospectus is filed, as the NLIU law review notes, which also records that shares from converted securities can now be offered for sale and that some institutional holders can count them toward the promoters’ minimum contribution. Then appoint bankers and counsel, and write the prospectus.

What changes for founders and investors at listing

Listing converts private rights into public duties. Investors’ special rights in the shareholders’ agreement, such as board seats and vetoes, usually fall away or need shareholder approval after listing. Every price-sensitive fact must be disclosed promptly, and founders become insiders subject to trading windows. Quarterly results, analyst calls and a share price that moves daily replace the annual valuation. Early investors and employees get the liquidity that [secondaries](/library/secondaries-founder-and-employee-liquidity) could only partly provide, subject to lock-ins. The company gains currency for acquisitions and a public reputation, and it loses the ability to have a bad quarter in private.

An IPO is a three-year project that ends with a week of bookbuilding. The companies that list well are the ones that ran their private years as if they were already public.

The IPO readiness review, every quarter

Once a listing is on the plan, give the board a one-page readiness review each quarter. Show the three-year operating profit, net tangible assets and net worth against the figure’s tests and say which route is open. Track the four workstreams with a named owner each: accounts and audit, board and committees, cap table and convertibles, legal and related-party clean-up. List every gap that would appear in a draft prospectus today, with a date to close it. Twelve months before the target filing, run a mock due diligence with outside counsel, and fix what it finds before the bankers see it.

Nothing here is legal, tax or investment advice. SEBI’s eligibility rules and the 2025 SME and ESOP changes were checked on 11 October 2026; the rules change often, so confirm them with your merchant banker and counsel before planning an issue.