BSE Tightens Rules for SME-to-Mainboard Migration

The Bombay Stock Exchange (BSE) has announced stricter rules for Small and Medium Enterprises (SMEs) seeking to migrate from the SME platform to the mainboard. These updated guidelines significantly raise the bar for profitability, shareholder participation, and overall financial strength, ensuring that only robust and transparent companies can make the move.

One of the most notable changes is the higher profitability requirement. SMEs will now need to show a minimum operating profit of ₹15 crore cumulatively over the past three financial years, with at least ₹10 crore in each individual year. This is a clear shift from the earlier, more relaxed rule, which only required a positive operating profit in any two of the last three years.

The public shareholder threshold has also been raised sharply, from 250 to 1,000. This step is designed to ensure wider investor participation and a more diverse shareholder base, which in turn can improve market stability and liquidity.

In addition to these changes, the BSE has introduced stricter financial benchmarks. SMEs must now have net tangible assets of at least ₹3 crore in each of the past three financial years. They must also meet minimum trading activity requirements, with trading volumes amounting to at least 5% of the weighted average equity shares in the last six months, and active trading on at least 80% of trading days.

According to the BSE, these changes aim to enhance market integrity, increase transparency, and strengthen investor confidence. By raising the standards, the exchange seeks to ensure that only financially strong, well-managed, and actively traded companies make the transition to the mainboard or opt for direct listing.

Overall, the tightened norms are expected to not only improve market quality but also offer better protection to investors, fostering a healthier and more transparent capital market ecosystem.