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What is SME IPO: Know The Eligibility Criteria & Listing Process

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Introduction:

MSMEs and SMEs are the backbone of India’s economic growth. They contribute around 30% of the GDP and support export, employment, innovation, and social inclusion. However, many SMEs find it challenging to access the funds needed for growth. This is where SME IPOs come in— providing a dedicated platform to raise capital directly from public investors. SME IPOs support small businesses and let investors diversify their portfolios. How exactly? 

Read on to learn more about the platform and the complete IPO list of SMEs. 

What is an SME IPO?

Understanding the Meaning and Purpose of SME IPOs

An SME IPO (Small and Medium Enterprise Initial Public Offering) allows small businesses to raise capital by listing their stock on a stock exchange. It is a process similar to larger companies’ IPOs but with relaxed rules tailored for smaller enterprises. An SME IPO lets SMEs access public funding without taking on debt, offering shares to the public, or using the funds for growth, expansion, or research.

The primary distinction is that SME IPOs are less restrictive than mainboard IPOs, making it easier for smaller businesses to raise funds. The eligibility criteria for a new SME IPO are as follows:

  • The SME should be registered under the Companies Act 1956.
  • Its face value (post-issue paid-up capital) must not exceed Rs.25 crore.
  • Net tangible assets must be valued at Rs.1.5 crore or more.
  • It must have a minimum track record of three years if established through the conversion of a partnership, proprietorship, or LLP .
  • The SME must have an active website.
  • The company’s promoters must be the same for at least one year after IPO filing.
  • The SME must trade in Demat securities.
  • The SME must also sign a contractual agreement with the depositories to ensure compliance with dematerialized (Demat) securities trading. 

How SME IPOs Support Small and Medium Enterprises

SME IPOs are crucial in helping small and medium-sized businesses (SMEs) access the capital they need to grow and compete in the market. These IPOs provide several advantages for SMEs, including:

  • Lower Investment and Turnover Thresholds: The thresholds for investment and turnover for SME IPOs are significantly lower than those of mainboard IPOs, making it easier for small enterprises to qualify. This inclusivity helps startups and growing businesses secure public funding, even with limited revenue or profits.
  • Access to Capital Without Debt Burden: One of the primary reasons SMEs choose IPOs is the ability to raise funds without the need for debt or dealing with interest. IPOs provide equity funding, which relieves the business of any repayment pressure and offers an alternative path to growth through equity infusion.

Current SME IPOs in India

Track Active SME IPOs in the Market Today  

Keeping track of the active SME IPOs is easy via multiple platforms. You can use the following to stay updated-

  • Visit the NSE and BSE websites for updates on SME listings and upcoming IPOs.
  • Check SEBI’s website for official announcements, filings, and approvals related to SME IPOs.
  • Follow financial news websites like Moneycontrol, Economic Times, and Business Standard for information on active SME IPOs and subscription data.
  • Use IPO tracking platforms like Chittorgarh, IPO Watch India, and SME IPO Tracker for real-time updates on ongoing SME IPOs.
  • Stay informed through your brokerage firm or stock market advisory that offers tools to provide alerts and updates about active SME IPOs.

As of January 2025, the currently open SME IPOs list includes the following- 

Company NameOpen DateClose DateIssue PriceIssue SizeIssue Type
Landmark Immigration16-1-2520-1-25Rs.70-72 Rs.40.32 croreBook Built Issue
EMA Partners India Limited17-1-2521-1-25Rs.117-124Rs.76.01 croreBook Built Issue
CapitalNumbers Infotech20-1-2522-1-25Rs.250-263Rs.169.37 croreBook Built Issue

Source: MoneyControl

Subscription Trends for Current SME IPO Listings

The overall trend in SME IPO subscriptions for January 2025 shows mixed interest. Some IPOs, like Rikhav Securities and Kabra Jewels, experienced exceptionally high demand, especially in the NII and Retail categories, with subscriptions well over 100x. 

However, others like EMA Partners and Indobell Insulation saw lower subscription levels, with total subscriptions ranging from 0.53x to 6.28x. QIB participation has generally been weak, while retail and NII investors have shown stronger interest, indicating varied investor sentiment across different IPOs.

Upcoming SME IPOs  

New SME IPOs to Watch in the Coming Months 

The list of SME IPO (upcoming) includes the following-

Company NameOpen DateClose DateIssue PriceIssue SizeIssue Type
Rexpro Enterprises Limited22-1-2524-1-25Rs.145Rs.53.65 croreFixed Price issue
Denta Water and Infra Solutions Ltd22-1-2524-1-25Rs.279-294Rs.220.5 croreBook built issue
CLN Energy Limited23-1-2527-1-25Rs.235-250Rs.72.30 croreBook built issue
GB Logistics Commerce Limited24-1-2528-1-25Rs.95-102Rs.25.07 croreBook built issue

Source: MoneyControl

How to Plan Investments in Upcoming SME IPOs?

Investing in SME IPOs can help you diversify your portfolio, but it requires a strategic approach to ensure returns. Here are some top investment strategies to consider:

  • Extensive Research: Look into the company’s financial health, business model, growth prospects, and valuations. Choose companies with a solid foundation and a clear growth plan. Also, analyze the closed IPOs to check the subscription and investment patterns of the industry.
  • Risk Management: Spread your investments across multiple SME IPOs to reduce risk. Avoid putting all your money into one IPO, as their performance can be unpredictable.
  • Long-term View: Adopt a long-term investment perspective to maximize returns and minimize losses.
  • Stay Informed: Keep an eye out for changes in economic policies and market changes Additionally, to increase your chances of getting shares allotted in an SME IPO, consider applying early, using multiple Demat accounts, and selecting the cut-off price option. 

Benefits of Investing in SME IPOs  

High-Growth Potential in Emerging Markets

SMEs are often in the early stages of growth, and investing in their IPOs can provide access to high-growth opportunities. These companies are more agile and scale quickly in emerging markets, offering potentially significant returns as they grow and expand.

Supporting Small and Medium Businesse

In India, SME IPOs are listed on dedicated platforms designed specifically for smaller businesses. These platforms provide a more supportive environment with regulatory structures suited to their scale. This ensures that SMEs are not bound by the more rigorous standards of the main stock exchanges, enabling them to focus on growth without facing insurmountable hurdles.

Diversification Opportunities for Investors

SME IPOs allow investors to diversify their portfolios by adding high-potential, smaller companies to the mix. These investments offer a balance to traditional stocks and bonds, spreading the risk across different types of assets.

Risks and Challenges in SME IPOs  

While SME IPOs offer great potential, they come with risks and challenges that investors and businesses must consider. The key risks involved are:

Limited Market Liquidity:

One of the biggest challenges for SME IPOs is the limited liquidity in the market. Since SMEs are smaller than large-cap companies, their share prices are volatile and may not trade as actively making it difficult for investors to buy or sell shares quickly. . 

Higher Volatility Compared to Mainline IPOs:

SME IPOs tend to be more volatile than larger, established companies. These businesses are still in their growth stages, and their stock prices can fluctuate significantly based on market conditions, investor sentiment, and business performance. This increased volatility means a higher risk of sharp price changes, leading to substantial gains or losses in a short period.

So, how do you invest in the recent SME IPOs?

Key Factors to Consider Before Investing

Business Fundamentals

Before investing in an SME, assess its financial health, focusing on earnings, cash flows, profitability, and balance sheet strength to confirm the business stands on a solid foundation.

Industry Prospects

Examine the growth potential of the industry the SME operates in. A sector with strong demand and low competition provides the right conditions for the business to thrive.

Valuations

Ensure that the IPO is priced reasonably compared to similar companies in the industry. A fair valuation is key to ensuring you’re not overpaying for shares. Overpriced IPOs might struggle to deliver expected returns, especially if the market cools or growth slows.

Use of IPO Proceeds

Look into how the capital raised from the IPO will be used. Will it be used to expand the company’s production capacity, invest in new technology, or support other growth initiatives? Allocating funds to areas that could enhance future cash flows can benefit long-term growth.

Risk Factors

Evaluate the risks associated with the SME, such as dependency on a few clients or pending legal issues. Understanding these risks helps assess the business’s ability to maintain consistent returns.

How Equentis Supports SME IPO Investments?

Share market advisory service providers like Equentis offer valuable tools and insights for investors looking to explore SME IPO opportunities:

  • Stay updated with real-time information on active and upcoming SME IPOs, ensuring you never miss an investment opportunity.
  • You can access a detailed list of all SME IPOs, enabling you to compare options and choose the best investment opportunities based on your goals.

Explore Equentis Tools for SME IPO Insights and effectively navigate the SME IPO market.

Conclusion:

SME IPOs offer a great opportunity to benefit from the growth of small and medium enterprises, which play a crucial role in the economy. While these IPOs can be a powerful tool for SMEs to access public capital and expand their businesses, assessing the risks involved is important, as these companies are still in their early stages. 

By following best practices and carefully evaluating readiness, SMEs can successfully navigate the IPO process. As the market evolves, SME IPOs will remain an essential tool for business growth. Stay updated with Equentis for the latest SME IPO trends and discover top IPO performers.

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FAQ

  1. How to invest in SME IPO?

    To buy an SME IPO, 
    Open a Demat account with a registered broker or bank
    Access the IPO section on the broker’s website or the exchange platform like NSE Emerge or BSE SME to view available IPOs. 
    Choose the desired SME IPO and enter the number of lots you wish to apply for. 
    After confirming your details, pay through UPI or other available methods. 
    Once the IPO is allotted, the shares will be credited to your Demat account.

  2. Should I invest in an SME IPO?

    SME IPOs, like any other IPO offerings, carry an element of risk. Whether an SME IPO is a good investment depends on the company’s fundamentals, the current market environment, and your personal risk appetite. Carefully evaluating these aspects can help you decide if an SME IPO aligns with your investment goals.

  3. Can the SME IPO listing be sold on the same day?

    Yes, as a retail investor, you can sell your SME IPO shares after they have been listed. However, other investors may be subject to lock-in periods, meaning they cannot sell their shares immediately.

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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.

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