The National Stock Exchange (NSE) and BSE have tightened the bidding process for small and medium enterprise (SME) initial public offerings (IPOs), in a move aimed at curbing speculative retail participation and improving price discipline.

Effective July 1, the revised bidding framework mandates a minimum application amount of ₹2 lakh across investor categories, eliminates the cut-off price option, and disallows both downward bid revisions and cancellations.

The current ‘retail individual investor’ category will be replaced with a broader ‘individual investor’ classification, defined as anyone bidding for a minimum of two lots valued at ₹2 lakh or more, exchanges said in separate circulars.

For categories reserved for employees, a minimum of two lots with an application size of more than ₹2 lakh and in multiples of the lot size, not exceeding ₹5 lakh, are allowed. Similarly, for shareholders and policyholders, the minimum investment is two lots worth over ₹2 lakh. Qualified institutional buyers (QIBs) and non-institutional investors (NIIs) can bid for more than two lots.

Tighter timelines

Bidding for all investor categories will conclude at 4 pm on the final day of issue, while UPI mandates must be accepted by 5 pm. The popular cut-off price mechanism, which allowed investors to bid without specifying a price, has been completely withdrawn, along with downward modifications and cancellations.

“The revised lot sizes and ₹2 lakh minimum application amount across categories will filter out noise and ensure only committed investors step in,” said Tarun Singh, founder and managing director at Highbrow Securities. “By scrapping the cut-off price mechanism and disallowing bid cancellations or downward revisions, SEBI is introducing much-needed price discipline.”

“Tighter UPI timelines, standardised bidding rules, and the removal of leniencies for certain investor categories point to a serious upgrade in how SME IPOs are expected to function. This is SEBI signalling that the SME platform is no longer a regulatory sandbox; it’s evolving, and it’s going to be held to a higher standard,” Singh said.

Until the new process comes into effect in July, both the current and the new processes will run in parallel for IPOs opening on or before June 30, 2025. In case of oversubscription spillover, dual systems will be permitted until July 11, 2025. Thereafter, the revised norms will be mandatory for all SME IPOs.

Published on June 19, 2025