IPOPlatform Blogs

This article simplifies the essentials of IPO pricing and listing, covering both SME and mainboard IPOs. It explains how IPO and listing prices are set, the impact of demand and supply, and the distinction between offer and listing prices. Key concepts like listing gains, flat listing, and listing losses are discussed, along with the NSE’s new 90% price cap for SME IPOs to control volatility, helping investors make informed decisions.

To list on the NSE SME Exchange, a company must comply with the Companies Act 1956/2013. The post-issue paid-up capital should not exceed ₹25 crore, and the company must have an operational history of at least three years. Promoters must hold at least 20% of post-issue share capital. Key financial requirements include positive net worth, operating profits of Rs1 crore for any two out of three years, and Free Cash Flow to Equity (FCFE) shall be positive for any two out of three years.

To list on the BSE SME Exchange, a company must meet the eligibility norms and requirements under the Companies Act 1956/2013. These include maintaining a post-paid up capital not exceeding ₹25 crore, a net worth of at least ₹1 crore for the last two years, and net tangible assets of ₹3 crore in the previous financial year. Additionally, the company must have a track record of at least three years, or receive project funding from approved institutions. Profitability criteria includes that a company must have operating profits of Rs 1 crore for any two out of last three financial years. Compliance with listing norms is essential for a successful SME IPO listing.

Services provided by Merchant Bankers in India are fundraising through IPOs, portfolio management, mergers, acquisitions, and project finance. They act as intermediaries between issuers and investors, regulated by SEBI’s Merchant Bankers’ Act, 1992. Top merchant bankers play a crucial role in underwriting IPOs, securing anchor investors, and guiding companies post-listing. Choosing the right merchant banker depends on factors such as market share, listing gains, success ratios, and post-listing performance, ensuring companies achieve optimal value and long-term growth.

The Draft Red Herring Prospectus (DRHP) is a key document in the IPO process for SMEs, filed before the final Red Herring Prospectus (RHP). It contains crucial details about the company, including its business operations, financials, and risk factors. The DRHP must be approved by SEBI and relevant stock exchanges, making it essential for a successful IPO. Learn how DRHP supports IPO readiness for SMEs in India.

In a Draft Red Herring Prospectus (DRHP), the details regarding promoters and the promoter group are crucial for compliance with SEBI (ICDR) Regulations, 2018. This information helps investors assess the company’s leadership, credibility, and track record, which are vital for attracting investment. Merchant bankers in India play a significant role in effectively presenting this information, ensuring regulatory adherence while enhancing investor confidence. A clear understanding of promoters and their groups is essential for the success and valuation of SME IPOs. 

Capital structure plays a vital role in a company's financial health, impacting its IPO success. Proper disclosure of shareholding patterns, ESOPs, and restructuring is crucial for attracting investors. Understanding the balance of debt and equity enhances IPO valuation and financial flexibility, essential for SMEs navigating the IPO process. Regulation on issue of bonus shares for SME IPOs in India  

Grey Market Premium (GMP) Explained for IPOs. Discover what Grey Market Premium (GMP) means in IPOs. GMP is the extra amount investors are willing to pay over the IPO price before shares officially list on NSE SME or BSE SME. Learn how to check GMP, its impact on IPO pricing, and its high-risk nature. Understand SME IPO GMP and its significance.

IPO valuation plays an important role in the process of IPO. Financial Performance like Revenue, profit margins, earnings growth, and cash flow are critical metrics for valuation. Fair valuation provides a clearer and accurate picture of a company’s financials, assets and liabilities. Merchant Bankers in India handle the process of IPO Valuation.

The Main Board and SME IPOs cater to different types of companies with varying needs and stages of development. Main Board IPOs suit larger, established companies, while SME IPOs are designed to help smaller, emerging businesses access public capital markets.

An SME IPO offers small and medium enterprises in India a valuable opportunity for fund-raising, organizational transparency, and brand visibility. By listing on the NSE or BSE SME platforms, companies can raise funds for expansion, reduce debt burden, and improve corporate governance. Benefits include wealth creation, access to investor expertise, and enhanced credibility. Successful listings also enable future fund-raising and the potential for mainboard migration, as shown in various SME case studies.

Merchant bankers play a pivotal role in supporting SMEs in India by facilitating fund-raising through IPOs, debt issues, and private equity. They manage the entire IPO process, from due diligence to post-IPO market making, ensuring regulatory compliance and fair valuations. Beyond IPOs, they assist with loan syndication, private equity, corporate finance advisory, and asset management. This comprehensive support makes merchant bankers essential partners for SMEs aiming to expand and optimize financial resources.