IPO Requirements

IPO Requirements

To launch an IPO in India, a company must satisfy SEBI and stock exchange requirements related to financial eligibility, regulatory compliance, corporate governance, and disclosures. The applicable criteria vary depending on whether the company is launching a Mainboard or SME IPO.

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In summary

Companies planning to launch an IPO in India must comply with eligibility criteria prescribed by the Securities and Exchange Board of India (SEBI) and meet the listing requirements of recognised stock exchanges such as the NSE and BSE. The exact requirements depend on the company's financial position and the type of IPO it intends to launch.
  • Mainboard IPOs require a minimum paid-up capital of Rs. 10 crore.
  • SME IPOs must have a post-issue paid-up capital of not more than Rs. 25 crore.
  • Profitable and non-profitable companies follow different SEBI eligibility criteria.
  • Companies must file a Draft Red Herring Prospectus (DRHP) and comply with disclosure and governance norms.
  • SEBI may reject a DRHP if important disclosures are incomplete or regulatory concerns exist.

Understanding these requirements can help companies prepare for a successful public issue while enabling investors to better evaluate upcoming IPOs.

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What are the IPO requirements in India?

Before a company can offer its shares to the public, it must satisfy regulatory, financial, and disclosure requirements prescribed by SEBI and the stock exchanges.
What are the IPO requirements?
 

What are the IPO requirements?

RequirementPurpose
SEBI eligibilityEnsures the company meets financial and regulatory standards.
Stock exchange approvalRequired for listing on the NSE or BSE.
Draft Red Herring Prospectus (DRHP)Discloses company information and IPO details.
Financial eligibilityCompanies must satisfy profitability or QIB-based criteria.
Corporate governancePromoters, directors, and the company must comply with regulatory requirements.

What are the requirements for a Mainboard IPO?

 

A Mainboard IPO allows large, established companies to raise capital by offering shares to the public for the first time. These IPOs are listed on recognised stock exchanges such as the NSE and BSE and must comply with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

To qualify for a Mainboard IPO, a company should have:


  • Paid-up capital of at least Rs. 10 crore
  • Compliance with SEBI ICDR Regulations, 2018
  • Approval from the relevant stock exchange before listing

How do SME IPO requirements differ?

 

SME IPOs are designed for small and medium-sized enterprises seeking capital for business growth. To support these businesses, the NSE and BSE operate dedicated SME platforms—NSE Emerge and BSE SME.

Compared with Mainboard IPOs, SME IPOs have relatively relaxed eligibility requirements. However, companies must still comply with exchange-specific listing norms and regulatory requirements.

ParameterSME IPO Requirement
Listing platformNSE Emerge or BSE SME
Post-issue paid-up capitalNot more than ₹25 crore
Regulatory frameworkSEBI ICDR Regulations and exchange-specific norms
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What are SEBI's eligibility criteria for an IPO?

SEBI prescribes separate eligibility requirements for profitable and non-profitable companies planning to launch an IPO.

Profitable companies

RequirementSEBI Criteria
Net worthMinimum Rs. 1 crore in each of the previous three years
Net tangible assetsAt least Rs. 3 crore in each of the previous three years
Cash and cash equivalentsNot more than 50% of net tangible assets (except OFS)
Operating profitAverage pre-tax operating profit of at least Rs. 15 crore in three of the previous five years
Company name changeAt least 50% of the previous year's revenue should come from the renamed business
IPO issue sizeNot more than five times the company's pre-issue net worth

Non-profitable companies


Companies that do not meet the profitability criteria can still launch an IPO by following the Qualified Institutional Buyers (QIB) route.

RequirementCriteria
IPO routeBook-building process
Minimum QIB allocation75% of the issue size
Failure to meet allocationIPO subscription amount must be refunded
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What additional requirements do NSE and SEBI prescribe?

Apart from financial eligibility, companies must also satisfy several regulatory and governance requirements before launching an IPO.
RequirementPurpose
Submit audited financial statements for the previous three yearsFinancial transparency
No pending NCLT or NCLAT proceedingsLegal compliance
Positive net worthFinancial stability
Minimum paid-up equity capital of Rs. 10 croreListing eligibility
Equity capitalisation of at least Rs. 25 croreExchange requirement
No SEBI disciplinary action against promoters or directorsInvestor protection
Promoters and directors should not be associated with barred companiesRegulatory compliance
Company should not be classified as a wilful defaulterFinancial credibility
Promoters and directors should not be declared offenders under the Fugitive Economic Offenders Act, 2018Legal compliance

Before investing in an IPO, reviewing whether the company meets these requirements can help you make a more informed investment decision. Explore upcoming IPOs to compare companies preparing for public listing.

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Why can SEBI reject a DRHP?

Every company planning an IPO must submit a Draft Red Herring Prospectus (DRHP) to SEBI. The regulator reviews the document to ensure investors receive complete and accurate information before the public issue.

SEBI may reject a DRHP for reasons such as:

ReasonExplanation
Unclear use of IPO proceedsPurpose of raising funds is not adequately explained
Insufficient promoter informationLack of transparency about promoters
Highly complex business modelInvestors may find business risks difficult to understand
Unexplained surge in business performanceCompany cannot justify sudden growth before the IPO
Significant litigationLegal proceedings may affect the company's future operations
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Conclusion

Launching an IPO requires companies to comply with financial, regulatory, and disclosure requirements prescribed by SEBI and recognised stock exchanges. The applicable criteria differ for Mainboard and SME IPOs, while profitable and non-profitable companies also follow separate eligibility routes.

Meeting these requirements and maintaining transparent disclosures can improve the likelihood of regulatory approval and help build investor confidence before the company's shares are listed.

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Frequently Asked Questions

IPO Requirements

What is the eligibility to apply for an IPO?

While companies themselves have eligibility requirements to launch an IPO, there are also criteria for investors who want to participate. Here's what you'll need to be eligible to apply for an IPO in India:

  • Demat account: You'll need an active Demat account linked to your bank account for IPO applications.
  • Bank account with sufficient funds: Ensure your linked bank account has sufficient funds to cover the cost of the IPO shares.
  • PAN card: A Permanent Account Number (PAN) card is required for all financial transactions in India, including IPO applications.
  • Age requirement: You must be at least 18 years old to invest in the Indian stock market and participate in IPOs.

What is the eligibility qualification for an open IPO?

You must have at least Rs 1.67 lakh in fully paid securities or cash in the account you use to enter the open IPO. The application must be for a minimum of 100 shares.

Who are eligible for IPO?

Individuals who are Indian residents and have a Demat account can participate in IPOs. Foreign investors may also be eligible under certain conditions.

What is the eligibility criteria for IPOs in India?

The eligibility criteria for IPOs in India generally include being an Indian resident, having a demat account, and meeting any specific requirements set by the issuing company or the Securities and Exchange Board of India (SEBI).

Can a normal person buy an IPO?

Anyone over 18 years old, legally able to enter into a contract, can invest in IPOs. The only prerequisites are a Permanent Account Number (PAN) from the Income Tax Department and a Demat account.

What is the minimum turnover to apply for IPO?

The minimum average daily turnover requirement for an IPO on the main board of the NSE is INR 10 lakhs during the last 6 months. Additionally, there's a requirement for a minimum average daily number of trades, which is 50, during the same period.

Who is not eligible for IPO?


An issuer is ineligible to launch an initial public offering (IPO) under the following circumstances:

(a) The issuer, any of its promoters, promoter group, directors, or selling shareholders are barred from accessing the capital market by the Securities and Exchange Board of India (SEBI).

(b) Any of the issuer's promoters or directors is also a promoter or director of another company that SEBI has barred from accessing the capital market.

(c) The issuer or any of its promoters or directors is a declared willful defaulter.

(d) Any of its promoters or directors is a designated fugitive economic offender.

What are the new rules for IPO?

SEBI has limited the funds allocated to general corporate purposes (GCP) in SME IPOs to a maximum of 15% of the total funds raised or ₹10 crore, whichever is less. Additionally, SME IPO proceeds cannot be used to repay loans owed to promoters, promoter groups, or related parties.

What is required for an IPO?

To launch an IPO, a company needs audited financial statements, regulatory approvals, a prospectus, underwriters, compliance with securities laws, and proper financial/business disclosures to attract investors.

What are the 4 types of IPO?

The four types of IPO are:

  1. Fixed price offering – Shares are sold at a predetermined price.
  2. Book building offering – Price is determined based on investor bids.
  3. Best efforts offering – Underwriters sell as many shares as possible.
  4. Dutch auction – Investors bid directly for shares.
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