REGULATORY UPDATE

FCFE Redefined: NSE Broadens SME Listing Eligibility
Link to Circular: https://nsearchives.nseindia.com/content/circulars/SME73818.pdf

The NSE, wide its circular dated April 20, 2026, has revised the computation of Free Cash Flow to Equity (FCFE) for SMEs seeking listing on NSE EMERGE. Key highlights:

Key Highlights:

• Equity inflows now included: Proceeds from share capital (incl. securities premium) added to FCFE.
• Easier eligibility: Positive FCFE required in at least 2 out of last 3 years—now achievable for equity-funded SMEs.
• Exclusion safeguard: Non-cash equity issuance (e.g., debt conversion) not considered in FCFE.
• Aligned with funding reality: Recognizes equity as a valid source alongside borrowings.
• Restated financials only: No projections permitted for FCFE computation.
• Immediate effect: Applicable to all DRHPs filed going forward.

Practical Insight:
While the revision may improve eligibility, stakeholders should assess the quality of FCFE (operational vs funding-driven) for informed decision-making.

(Shared for awareness and professional update.)

RV FCS Abhinav Agarwal
Partner
Atulya Corporate Advisors LLP & CorpValuers
Corporate Law Advisors & Registered Valuers (IBBI – SFA)
abhinav@atulyadvisors.com | connect@corpvaluers.com
+91 – 9990061697