Introduction
When companies seek to raise capital for growth and expansion, they turn to the stock market through Initial Public Offerings (IPOs). An IPO is the process by which a private company becomes publicly traded by issuing shares to investors. IPOs allow businesses to access public funds, enhance visibility, and provide liquidity to existing shareholders.
India has seen an unprecedented rise in IPO activity in recent years, with both Mainline IPOs and Small and Medium Enterprise (SME) IPOs playing a crucial role in the financial ecosystem. Understanding the difference between IPO and SME IPO is essential for investors looking to participate in new stock market opportunities.
This article provides an in-depth analysis of Mainline IPOs and SME IPOs, highlighting their key characteristics, investment processes, and how they impact the stock market.
What Are Mainline IPOs?
Definition and Characteristics of Mainline IPOs
A Mainline IPO refers to a public offering made by large and well-established companies looking to list their shares on major stock exchanges such as the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). These IPOs typically involve companies with high revenue generation and strong financials.
Eligibility Criteria for Companies Opting for Mainline IPOs
To qualify for a Mainline IPO, companies must meet the following criteria:
- Minimum post-IPO paid-up capital: ₹10 crores or more.
- Profitability Requirement: A minimum net tangible asset value of ₹3 crores in the last 3 years.
- Minimum Net Worth: ₹1 crore in the last three years.
- Regulatory Compliance: Approval from the Securities and Exchange Board of India (SEBI) before going public.
Investor Categories and Allotment Process in Mainline IPOs
Mainline IPOs offer shares to three broad categories of investors:
- Retail Individual Investors (RIIs): Investors applying for less than ₹2 lakhs worth of shares.
- Non-Institutional Investors (NIIs): High-net-worth individuals (HNIs) applying for shares above ₹2 lakhs.
- Qualified Institutional Buyers (QIBs): Large institutional investors like mutual funds, banks, and foreign portfolio investors.
The allotment process is transparent and conducted through the book-building method or the fixed price method.
What Are SME IPOs?
Definition and Purpose for Small and Medium Enterprises
SME IPOs are designed for Small and Medium Enterprises (SMEs) looking to raise capital from the public. These IPOs provide growing businesses with an opportunity to access public funds while being subject to relaxed compliance norms compared to Mainline IPOs.
Key Features of SME IPOs and Their Unique Benefits
- Minimum post-IPO paid-up capital: Between ₹1 crore and ₹25 crores.
- Lower Listing Requirements: SMEs are not required to show continuous profitability.
- Higher Retail Participation Costs: Minimum lot size starts at ₹1 lakh per application.
- Lower Compliance Burden: Simplified reporting norms compared to Mainline IPOs.
Regulatory Framework Governing SME IPOs in India
SME IPOs are regulated by the SEBI but are approved by the respective stock exchanges:
- NSE Emerge – SME listing platform of National Stock Exchange.
- BSE SME – SME listing platform of Bombay Stock Exchange.
These platforms ensure that SMEs can raise capital with less stringent regulatory restrictions.
Difference Between Mainline IPO and SME IPO
| Feature | Mainline IPO | SME IPO |
| Eligibility | Post-IPO paid-up capital ₹10 crore or more | Post-IPO paid-up capital between ₹1 crore and ₹25 crore |
| Stock Exchange | NSE, BSE | NSE Emerge, BSE SME |
| Regulatory Authority | SEBI approval required | Exchange approval required |
| Profitability Requirement | Three years of profitability required | No strict profitability requirement |
| Minimum Investment Lot | ₹10,000 – ₹15,000 | ₹1 lakh or more |
| Allotment Norms | Shares must be allotted to at least 1,000 subscribers | Minimum 50 subscribers required |
| Underwriting Requirement | Not mandatory | Mandatory (15% underwritten by merchant bankers) |
| Target Investors | Large retail participation | Institutional investors and HNIs |
| Compliance Burden | High | Relatively low |
How to Invest in SME and Mainline IPOs
1. Steps to Apply for IPOs Through ASBA or Broker Platforms
Both Mainline IPOs and SME IPOs can be applied for through the ASBA (Application Supported by Blocked Amount) facility provided by banks and brokers.
Steps to Apply:
- Select the IPO: Choose a Mainline or SME IPO you want to invest in.
- Use ASBA Facility: Log in to your bank account or broker platform to apply.
- Enter Details: Specify the lot size and bid price (for book-building IPOs).
- Funds Blocked: Your bank will block the application amount until allotment.
- Allotment and Listing: If you receive allotment, the shares will be credited to your Demat account on the listing day.
2. Key Documents and Accounts Needed for Application
To apply for an IPO, you need:
- PAN Card (Mandatory for IPO applications).
- Demat Account for holding shares post-allotment.
- Bank Account with ASBA facility enabled.
- UPI ID (For retail investors applying through brokers).
3. Importance of Analyzing IPO Prospectuses
Before investing in any IPO, always review the Red Herring Prospectus (RHP) to understand:
- Company Financials (Revenue, Profitability, Debt).
- Future Growth Plans (Business Expansion Strategy).
- Industry Trends and Risks (Market Demand, Competition).
Know more about:
IPOs | Current IPOs | Upcoming IPOs | Listed IPOs | Closed IPOs | IPO Performers
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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
