India’s markets regulator to consult stakeholders to review IPOs of small firms

India’s markets regulator will consult with exchanges, banks and small-and-medium enterprises associations to review initial public offerings by small businesses, Chairman Tuhin Kanta Pandey said on Thursday.

“We have asked exchanges to do physical inspection of SMEs going for IPOs to validate the businesses,” Pandey said during a speech at the SBI Banking and Economics Conclave.

Last year, the Securities and Exchange Board of India had issued tighter regulations for IPOs by small businesses after a boom in public listings.

Small-and-medium-sized businesses are defined in the country as companies with an annual turnover of 50 million rupees ($568,860.57) to 2.5 billion rupees ($28.4 million).

SEBI had mandated entities that are listing should have made a profit of 10 million rupees from operations in two of the three financial years.

Pandey also added the regulator has seen some “egregious behaviour” in IPOs by small-and-mid-sized firms, especially by merchant bankers.

The regulator, in December last year, had also overhauled rules for merchant bankers, asking them to separate businesses not directly linked to merchant banking activities into distinct entities under different brand names.