An SME IPO (Small and Medium Enterprise Initial Public Offering) allows small and medium-sized companies to raise capital by offering their shares to the public. These IPOs are listed on SME platforms of recognized stock exchanges like the BSE SME or NSE Emerge.
Key Features of SME IPOs:
- Eligibility Criteria for Companies:
- Net tangible assets of at least ₹3 crore.
- Positive net worth.
- Minimum operational track record of 3 years.
- Post-issue paid-up capital should not exceed ₹25 crore.
- Investor Participation:
- Retail investors and High-Net-Worth Individuals (HNIs) can participate.
- Minimum lot sizes are larger compared to mainboard IPOs (e.g., ₹1–₹1.5 lakh per lot).
- Listing Requirements:
- Lower disclosure and compliance requirements than mainboard IPOs.
- Companies can graduate to the mainboard after meeting certain benchmarks.
- Risk and Return:
- SME IPOs often involve higher risk due to the smaller scale of operations.
- They may offer high returns for investors willing to take risks.
Advantages for Companies:
- Access to growth capital.
- Improved visibility and credibility.
- Ability to attract better talent and business partnerships.
Advantages for Investors:
- Opportunity to invest in high-growth early-stage businesses.
- Portfolio diversification.
Things to Consider Before Investing in SME IPOs:
- Analyze the company’s financial performance, growth potential, and industry trends.
- Understand the risks associated with smaller businesses.
- Assess the IPO’s pricing and valuation compared to peers.
Examples of SME IPOs in 2024:
Some recent SME IPOs include:
- Nisus Finance Services IPO : ₹114.24 crore issue listed on BSE SME (Price Band: ₹170-180 per share).
- Star Agriwarehousing IPO: An upcoming issue in the logistics and warehousing space.