Mainboard IPO Eligibility: SEBI ICDR Regulation 6 Explained

Founders often ask me whether their company is big enough for the main board. Size is only part of the answer. SEBI's ICDR Regulations offer two doors into a main board IPO: a track record route for profitable companies, and a route for companies without that record, which relies on institutional investors instead.

Which door you use shapes almost every later decision: how you restate your financials, how the book is built, who your investors are and how you price. This note explains both routes, the conditions every issuer must meet, and how I test a company against them. The figures are from the regulations as I read them; confirm each against the current text before relying on it.

Route one: the Regulation 6(1) track record test

Under Regulation 6(1), an issuer qualifies if it meets all of these conditions, each calculated on a restated and consolidated basis.

These are floors, not targets. A company that clears them narrowly will find that its restatement, its peer set and investor appetite matter far more than the eligibility arithmetic. The profit condition needs the most care, because restatement adjustments land directly on it.

• Net tangible assets of at least Rs 3 crore in each of the preceding three full years, with not more than 50% held in monetary assets unless the excess is committed to the business or the issue is entirely an offer for sale
• Average operating profit of at least Rs 15 crore over the preceding three years, with an operating profit in each of those years
• Net worth of at least Rs 1 crore in each of the preceding three full years
• If the company changed its name in the last year, at least 50% of the previous full year's revenue earned from the activity the new name indicates

Route two: Regulation 6(2) for companies without the track record

A company that does not meet Regulation 6(1), often a loss-making or recently profitable technology business, can still list under Regulation 6(2). The issue must be made through book building, and at least 75% of the net offer must be allotted to qualified institutional buyers; if that cannot be achieved, the full subscription is refunded.

This route shifts the risk assessment to institutions. Retail allocation is capped at 10% and non-institutional investors at 15% of the net offer, compared with at least 35% retail, at least 15% non-institutional and at most 50% QIB under the 6(1) route. There are also limits on how much large existing shareholders can sell in the offer for sale under this route.

The consequence is simple: a 6(2) issue lives or dies on institutional demand. Before choosing it, you need a story fund managers will buy, listed peers they can compare you with, and bankers who can bring anchor and QIB demand.

Conditions every issuer must meet

Whichever route you take, Regulations 5 and 7 apply to all issuers. The company, its promoters, promoter group, directors and selling shareholders must not be debarred by SEBI, and no promoter or director may be a wilful defaulter, a fraudulent borrower or a fugitive economic offender.

There must also be no outstanding convertible securities or rights to receive equity shares, except employee stock options and certain fully paid instruments that convert before the red herring prospectus is filed. That is why convertible notes, CCPS and warrants have to be planned for conversion well in advance.

• Listing applications made to the stock exchanges, with one chosen as the designated exchange
• Agreements with the depositories, and all promoter shares held in demat form before filing
• All partly paid shares fully paid up or forfeited
• Firm arrangements through verifiable means for 75% of the stated means of finance for the project, excluding issue proceeds and identifiable internal accruals
• General corporate purposes kept within 25% of the amount raised

Promoter contribution and public shareholding

Promoters must contribute at least 20% of the post-issue capital as minimum promoter contribution, locked in for a set period that is longer where the issue mainly funds capital expenditure. Our separate note on promoter contribution and lock-in covers which shares qualify and the lock-in tiers.

After listing, the company must reach and keep minimum public shareholding of 25%, with a glide path and a lower minimum offer size for very large issuers under the Securities Contracts (Regulation) Rules. If the founding group holds nearly all the shares today, design the offer size and the later dilution plan with this in mind.

How I test a company against these rules

I start with a restated view of the last three years, not the audited statements as filed. Restatement corrects prior-period errors, aligns accounting policies across years and consolidates subsidiaries, and each change can move net tangible assets, operating profit or net worth. For a main board issuer this also means Ind AS financial statements, since companies in the process of listing on the main board fall within the Ind AS rules.

Then I run each test year by year, flag any condition that passes narrowly, and review the cap table for anything Regulation 5 would object to: an outstanding convertible, a debarred shareholder, an unexplained transfer. Only after that do we discuss which route, which exchange and which bankers.

Finally, timing. After filing, the draft is open for public comments for 21 days, SEBI's observations follow, and the issue must open within 12 months of those observations. Eligibility has to hold on the financial years you file with, so plan which year that will be.

Frequently asked questions

Can a loss-making company do a mainboard IPO in India?

Yes, under Regulation 6(2) of the ICDR Regulations. The issue must be book built and at least 75% of the net offer allotted to qualified institutional buyers, or the money is refunded. Retail allocation is capped at 10% under this route.

What profit is needed for a mainboard IPO under Regulation 6(1)?

An average operating profit of at least Rs 15 crore over the preceding three years, with an operating profit in each year, on a restated and consolidated basis. The net tangible assets and net worth tests apply as well.

Can we file a DRHP while convertible notes or CCPS are outstanding?

Generally no. Outstanding convertibles block eligibility, except employee stock options and fully paid instruments that convert before the red herring prospectus is filed. Agree the conversion plan with your investors early.

Which route is better, 6(1) or 6(2)?

If you qualify under 6(1), it usually gives more flexibility in investor mix, including a larger retail portion. Regulation 6(2) suits companies with strong institutional interest but no qualifying profit record. The choice should follow the facts, not preference.

Related guides

• Promoter contribution and lock-in rules
• Pre-IPO structuring: the 18-month plan
• Moving from the SME platform to the main board
• Our advisory services