Definition
Eligibility Norms (IPO)
Eligibility norms are the SEBI conditions a company must satisfy to make a mainboard IPO, covering profitability, net worth and track record.
Under SEBI ICDR Regulations, a company can do a mainboard IPO via the profitability route — net tangible assets, operating profit and net worth tests over the preceding years — or via the alternative route requiring that at least 75% of the issue be allotted to QIBs. The alternative route lets profitable-but-young or loss-making companies list if institutions back them.
These norms aim to balance access to capital with investor protection. Companies that fail both routes cannot list on the mainboard and may instead use the SME platform if they meet its lighter criteria.
Related terms
- Qualified Institutional Buyer (QIB)A QIB is a large, sophisticated institutional investor — such as a mutual fund, bank, insurer or FPI — that is allotted a dedicated portion of an IPO.
- Mainboard IPOA mainboard IPO is a public issue on the primary boards of the NSE and BSE, subject to the full SEBI eligibility and disclosure regime.
- Net Tangible AssetsNet tangible assets are a company's physical and financial assets minus its intangibles and total liabilities, a figure SEBI uses in one route of its IPO eligibility test.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.