SME to Mainboard Migration: The Bar India's Exchanges Have Raised

Many promoters treat an SME listing as a waiting room. Raise on BSE SME or NSE Emerge, build a record for a few years, then move up to the mainboard and its deeper pool of institutional money. For a long time that second step was largely procedural.

That is no longer the position. Both exchanges rewrote their criteria during 2025, and migration has become a second qualification round rather than a graduation ceremony.

What SME to mainboard migration now requires

The statutory framework sits in Regulation 277 of the SEBI ICDR Regulations, which permits an SME-listed issuer to migrate provided it meets the exchange's eligibility criteria and obtains shareholder approval by special resolution. That resolution carries an unusual test: votes cast by non-promoter shareholders in favour must be at least twice the non-promoter votes cast against. Promoter control of the register does not carry it.

The substance, though, sits with the exchanges, and they have tightened sharply.

• NSE, from May 2025, requires at least three years listed on Emerge, revenue from operations above Rs 100 crore in the last financial year, positive operating profit in two of the preceding three years, average market capitalisation of at least Rs 100 crore, and 500 public shareholders on the application date. Promoter holding must be at least 50 per cent of what it was on the SME listing date.

• BSE, from August 2025, requires average EBITDA of Rs 15 crore across the preceding three financial years with a floor of Rs 10 crore in each year, 1,000 public shareholders, average market capitalisation of Rs 100 crore over six months, a three-year listing history and a clean LODR compliance record.

BSE has also introduced explicit liquidity conditions covering the proportion of shares traded, the number of market days on which the scrip trades, and floors on daily turnover and number of trades.

The two exchanges are no longer symmetrical

This is the point most boards miss. NSE's test is revenue-led; BSE's is profit-led. A company doing Rs 150 crore of revenue on thin margins may clear NSE's bar and fail BSE's Rs 15 crore EBITDA test outright. A high-margin, lower-revenue engineering or software business faces the reverse problem.

Because the platform you list on determines the migration test you will eventually face, the choice of exchange at IPO stage now carries a five-year consequence. Model it against projected financials at the time of the original listing.

Liquidity has become something you manage

Many SME scrips trade thinly because promoters hold a large majority and the float sits with a handful of allottees. A company can be profitable, compliant and growing, and still fail on trading days or average daily turnover. That makes development of the shareholder base an operational task rather than a market accident. Research coverage, consistent quarterly disclosure, investor meetings and a reasonably distributed allotment at IPO all feed into numbers the exchange examines three years later.

Crossing Rs 25 crore no longer forces your hand

Historically, an SME issuer whose paid-up capital rose past Rs 25 crore was pushed towards migration. Following the 2025 ICDR amendments, an issuer may undertake a further issue beyond that threshold while remaining on the SME platform, provided it undertakes to comply with the LODR provisions applicable to mainboard-listed companies.

Useful flexibility, but not free. Mainboard-level LODR means mainboard-level board composition, committee structure, related-party approval processes and disclosure timelines, without the mainboard's valuation or liquidity benefit.

The bottom line

• Plan migration as a second eligibility test from the IPO onwards, not as a formality after three years.

• Choose the SME platform with its migration criteria in view. NSE tests revenue, BSE tests EBITDA, and the two are not interchangeable.

• Build and monitor liquidity and public shareholder count deliberately from listing day.

• Track promoter dilution against the NSE 50 per cent floor before any secondary sale or fresh issue.

• Read the post-Rs 25 crore LODR route as a compliance commitment, not a shortcut.

By CA Dhruv Seth, Seth & Associates, Chartered Accountants, Lucknow

This article is for general information and does not constitute investment, legal or tax advice. Regulations change; please verify the current position or speak to a qualified adviser before acting.