India's Small and Medium Enterprises (SMEs) have demonstrated remarkable growth in the IPO market, raising over ₹37,500 crore cumulatively across more than 1,450 companies across 35 industries and over 130 cities. According to data from Prime Database, 82% of this total amount, or ₹32,142 crore, has been raised in just the last five years, showcasing the recency of the SME IPO market boom. The amount raised through SME IPOs has seen a 15x jump from 2021 levels by the end of 2025, with the market showing a Compound Annual Growth Rate (CAGR) of 98% over this four-year period.
India's markets regulator has approved sweeping changes in rules that could bolster tiny-company listings and increase investor participation, according to people familiar with the matter. SEBI has approved raising the maximum post-issue paid-up capital for companies listing on SME platforms to ₹100 crore from the current ₹25 crore, a move that could allow companies with market valuations of up to about ₹5,000 crore to tap the SME IPO route. The proposals were discussed and approved by the Primary Market Advisory Committee on Wednesday, with SEBI expected to review the proposals internally before seeking public comments through a draft paper. The regulator is also considering removing the minimum application size of ₹2 lakh for individual investors, which was doubled from ₹1 lakh less than two years ago to curb excessive speculative retail frenzy.
The proposed changes would significantly expand market access, with sources indicating that there are several companies that aren't small enough to be eligible under the current SME framework, but still find it very difficult to meet the higher costs for listing on the mainboard platform. As reported by The Hindu BusinessLine, the changes represent a carve-out for these companies to be able to list on SME, grow using the capital and move to the mainboard. SEBI is also looking at easing the market-making requirements for SME issues, potentially lowering the minimum number of years, and may also ease the mandatory requirement of underwriting the full SME IPO issue size. The regulator had observed an improvement in retail behaviour last year and lowering the entry barrier would encourage more participation as the quality of SME companies also increases.
Shiprocket, the country's largest e-commerce enablement provider by revenue, is set to raise ₹1,617 crore through its IPO comprising ₹885 crore via fresh equity and ₹732 crore via offer for sale (OFS). The company plans to use the proceeds to fund technology infrastructure expansion, repay debt, and support marketing initiatives. As reported by ET Intelligence Group, the company has not identified any promoters, with Bertelsmann Nederland BV being the largest shareholder at 21.3% stake before the IPO. The co-founders' stakes will fall to 4.6% each after the IPO from 6.2% earlier after considering ESOPs.
Manufacturing and engineering, particularly EPC, precision components, and industrial equipment, have been the most consistent draw, with capital goods and IT together accounting for nearly 45% of the index market cap. According to the report, healthcare, construction and services command a much smaller portion, while renewable energy and regional consumer brands have emerged as newer themes this year. The BSE SME IPO index is up 39% from the lows it saw on March 30, 2026, following a sharp 30% fall in the index levels from the highs of August 2025. Data showed that around 80 SMEs have listed in the first half of 2026, compared to 267 in 2025, reflecting the impact of recent regulatory tightening measures.
Despite the market growth, accounting mismatches, troubled investments and corporate governance issues have ensured that the trust deficit with regards to this space has grown at an equal clip as the space itself. As reported by CNBC TV18, SEBI's own review has found that half of the SME-listed companies have related-party transactions in excess of ₹10 crore, while one in five exceed ₹50 crore, becoming a common channel for inflated revenue. The report highlights cases like Trafiksol ITS Technologies, which raised ₹45 crore in September 2024 but had its IPO proceeds frozen by SEBI after fraudulent vendor dealings were discovered.
