India’s capital market regulator has started a detailed review of rules for small-company initial public offerings, or IPOs, and delisting. The move could bring changes to the way smaller firms enter the stock market and later leave it.
Securities and Exchange Board of India Chairman Tuhin Kanta Pandey shared the update on August 19, 2026, at an event in Mumbai. He said SEBI has begun a comprehensive review of the rules. One major issue is the cost of market making for small-company IPOs.
The review comes at a time when India’s IPO market has grown at a fast pace. Smaller companies also want easier access to public money. At the same time, SEBI has to make sure that investors get enough protection when they put money into these businesses.
Why small-company IPOs matter
Small and medium-sized companies play an important role in India’s economy. Many of these firms need capital to expand factories, add new products, hire staff or enter new markets. Bank loans can help, but equity markets can give companies another source of money.
An IPO allows a company to sell shares to public investors. The money can then support business growth, debt reduction or other approved uses. A stock market listing can also improve a company’s public profile and give early investors a way to sell their shares.
However, a public listing can be expensive and complex. A smaller company may not have the same financial strength as a large corporation. The cost of compliance, disclosures, merchant banking and other requirements can therefore have a bigger effect on a small issuer.
This is one reason the SEBI review matters. The regulator wants to see whether the current rules work well for smaller businesses without weakening investor safeguards.
Market making is a key concern
One of the main points raised by Pandey is market making.
Market makers help support the trading of shares after an IPO. Their role is important because shares of smaller companies may not have the same level of daily trade as large companies. A market maker can help provide buy and sell quotes, which can support liquidity in the stock.
The problem is cost.
Pandey said market-making requirements add to the cost of small-company IPOs. For a large company, such an expense may be easier to manage. For a small business, the same cost can have a much bigger impact on the total IPO expense.
SEBI now wants to examine this issue as part of its wider review. The goal is not simply to remove a rule. The regulator has to assess whether there is a better way to provide liquidity while keeping costs under control.
A balance between access and safety
The biggest challenge for SEBI is balance.
If rules are too strict, smaller firms may find the stock market too costly or difficult to access. That could stop good businesses from raising capital from public investors.
If rules are too loose, investors could face higher risks. Small companies may have less financial history, fewer resources and lower levels of public information than large listed firms.
SEBI therefore has to find a middle path. Companies need a clear and practical route to the market, while investors need reliable information and strong safeguards.
This approach fits with SEBI’s wider goal of what Pandey has called “optimum regulation”. In earlier remarks, the regulator said it wants to reduce unnecessary compliance while keeping investor protection and market integrity at the centre.
More SME rules could come under review
The review may cover more than market making.
Business Standard reported on August 19 that SEBI plans to examine several parts of the SME listing framework, including trading lots, market making, underwriting and migration rules.
Each of these areas can affect how small firms use the public market.
Trading lot rules can affect how easily investors buy or sell shares. Underwriting rules can affect the way an IPO is supported before it reaches the market. Migration rules matter when a company moves from an SME platform to a larger main board.
A review of these areas could make the system easier to understand and use. But SEBI will also need to study the effect of any change on market liquidity and investor risk.
Delisting rules also face a review
SEBI’s review also covers delisting rules.
Delisting means a company’s shares leave the stock exchange. This can happen for several reasons. A company may want to become privately held again, or a larger shareholder may seek full control of the business.
Delisting can be more complex for small companies because their shares may have fewer buyers and sellers. The valuation process can also be difficult when there is limited market activity.
A clear delisting process is important for both sides. Company owners need a workable way to exit the public market when the conditions are right. Public shareholders, however, need fair treatment and a reasonable chance to receive value for their shares.
SEBI’s decision to review both IPO and delisting rules suggests that the regulator wants to look at the full life of a smaller listed company, from entry to exit.
India wants more companies in the market
The review also comes as India’s capital markets continue to expand.
In a January 2026 address, SEBI said the first nine months of that financial year had seen ₹1.7 trillion raised through 311 IPOs, while total equity mobilisation had crossed ₹3.8 trillion. SEBI also said the number of unique investors had risen from 4.3 crore in FY20 to 13.7 crore.
These figures show the size of the opportunity.
More companies now see the stock market as a possible source of long-term capital. More households also take part in equity markets. That makes the quality of the rules even more important.
A strong IPO system can help companies raise funds while also give investors access to new businesses. But fast growth can create new risks. SEBI therefore faces pressure to keep the market open without allowing weak practices to grow.
SME IPOs need better support
SEBI has already taken steps to make SME listings easier.
In a February 2026 address, the regulator said it was examining disclosure and regulatory requirements for SMEs to improve ease of doing business while keeping proper investor safeguards. It also said work was underway on a dedicated SME portal that could act as a single digital gateway for issuer information and compliance guidance.
SEBI also noted that merchant bankers have an important role in SME IPOs. They manage the IPO process and also have responsibility for market making.
The regulator has also called for more awareness among small businesses about the listing process and post-listing duties. This matters because some smaller firms may not have the same level of financial and legal resources as larger listed companies.
Better information before an IPO can help both companies and investors.
Global fund management is another focus
Pandey’s comments on August 19 were not limited to small-company IPOs.
SEBI is also looking at ways to make India a more attractive base for global fund management. The regulator has proposed changes to portfolio manager rules that could make it easier for key decision-makers to operate from India.
This is part of a wider effort to deepen India’s financial market.
If more global fund managers operate from India, the country could gain more financial activity, jobs and investment expertise. It could also improve India’s position as a financial centre.
The IPO review and these fund-management changes show that SEBI is working on several parts of the capital market at the same time.
SEBI also warns against market abuse
While SEBI looks at ways to reduce costs and make markets easier to use, Pandey has also stressed that investor protection remains important.
He said the regulator can detect possible manipulation more easily under the new Closing Auction Session, compared with the earlier VWAP-based system. He also warned that SEBI would take strict action against misconduct.
This message is important for small-company stocks because lower liquidity can sometimes create greater price risk.
A thinly traded stock can see sharp price moves when there are few buyers or sellers. Strong surveillance can therefore play a major role in keeping the market fair.
What the review could mean
The review does not yet mean that SEBI has decided to change the rules. No final changes or specific new numbers have been announced.
For now, the key message is that SEBI sees a need to study the framework in detail. Market making is one clear concern because of the extra cost it creates for smaller IPOs. Other areas, such as trading lots, underwriting and migration, may also receive attention.
For small businesses, any useful reform could lower the cost of a public listing and make the market more accessible. For investors, the real test will be whether easier access comes with enough disclosure, liquidity and protection.
A possible new phase for SME IPOs
India’s SME IPO market has grown as more businesses look beyond traditional bank finance. But growth also brings the need for better rules.
SEBI’s latest review shows that the regulator wants to assess whether the present system still fits the market. The focus on market-making costs is especially important because smaller companies often operate with tighter budgets.
A better framework could help more quality businesses reach public markets without placing too much cost on them. At the same time, strong investor safeguards can help maintain trust.
For now, the review is at the study stage. The final outcome will depend on SEBI’s assessment and its talks with market participants. But the August 19 announcement is a clear sign that India’s small-company IPO framework may be ready for a fresh look.
The aim will be simple: make it easier for good small companies to raise public capital, while keeping the market fair, transparent and safe for investors.
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