BSE Tightens Mainboard Migration Norms for SMEs to Strengthen Transparency and Investor Confidence

The Bombay Stock Exchange (BSE) has introduced stricter eligibility norms for small and medium enterprises (SMEs) seeking to migrate to its mainboard, as well as for companies listed on other exchanges aiming for a direct listing. The move, aimed at improving transparency, investor protection, and the overall quality of listings, comes just over three months after the National Stock Exchange (NSE) raised its own thresholds for SME migration.

Under the revised framework, companies must now post an operating profit of at least ₹15 crore cumulatively over the last three financial years, with a minimum profit of ₹10 crore in each year. This is a sharp increase from the earlier requirement of simply having a positive operating profit in any two of the past three years.

Additionally, the minimum number of public shareholders required has been raised from 250 to 1,000 to ensure broader investor participation and improved liquidity. Companies must also demonstrate that at least 5% of their weighted average equity shares were traded over the last six months and that the stock was actively traded on at least 80% of trading days during this period.

The exchange has also made it mandatory for companies to maintain net tangible assets of at least ₹3 crore in each of the last three years, alongside a clean compliance and governance record.

NSE’s Earlier Reforms

These changes follow a similar tightening of norms by the NSE, effective May 1, 2025. The NSE’s revised rules require SME firms seeking mainboard migration to have paid-up equity capital of at least ₹10 crore, average market capitalization of ₹100 crore, and revenue from operations exceeding ₹100 crore in the latest financial year, in addition to profitability in at least two of the past three years. Companies must also have a minimum of three years’ listing track record on the SME platform and at least 500 public shareholders at the time of application.

Regulatory Push

Both exchanges have acted in response to heightened regulatory scrutiny from the Securities and Exchange Board of India (SEBI) over governance lapses and alleged fund diversion among certain SME-listed companies. By raising entry barriers, BSE and NSE aim to filter out financially weak or non-compliant firms, thereby improving the credibility of India’s capital markets.

Market experts believe these changes will reduce speculative activity in SME scrips and encourage only fundamentally sound companies to take the mainboard route. “The focus is shifting from quantity to quality. Higher thresholds will give investors greater confidence and make India’s exchanges more attractive for institutional participation,” said a senior capital markets analyst.

A More Disciplined Path Ahead

With BSE and NSE now enforcing stringent eligibility conditions, the SME-to-mainboard pipeline is expected to narrow in the short term. However, industry observers say the long-term impact will be positive, as stronger governance standards and higher financial performance requirements will lead to a healthier, more transparent market ecosystem.