Yes, Market Making is compulsory for 3 years post listing on SME platform.
Cost of raising funds through SME IPO ranges from 40-50 Lakhs depending on parameters like IPO size, services used etc. Sometimes it may be lower also as every IPO is different and cost varies depending on the IPO
Though, the technical requirement as per the eligibility criteria is that the company should have positive EBITDA. However, the company which has achieved a turnover level of 20 cr+ and PAT of around 1cr+ (however in case turnover is 30cr+, 3-4% PAT is feasible) of revenues has an advantage over others. A company with lower turnover or profitability cannot derive good valuations.
The company is required to have net tangible assets of Rs 3 cr as per the revised eligibility criteria of BSE SME platform.
The BRLM who has been appointed for the IPO usually raises the funds. Else the companies may arrange for investors themselves in their investor community.
The cost of underwriting varies between 3-10% depending on factors like size of IPO and other factors.
The company needs to establish a consistently growing trend in its profitability. A sudden rise in profits appears window dressed to the investors. Hence a trend needs to be established over some justified time period.
Yes, a proprietorship firm can bring the IPO on conversion to public limited company. One needs to go through the Revised Eligibility Criteria.
Yes, a partnership firm can bring the IPO on conversion to public limited company. One needs to go through the Revised Eligibility Criteria.
The firm will first be comverted in to a public limited company and that will be listed on the exchange. So, the listing happens at the Company level not the business level.
Usually SME IPO takes around 5-6 months.
Chittorgarh.com takes you through the entire IPO journey involving appointment of BRLMs, Legalities and Compliances, Due Diligence, Peer Review Audit, Appointment of Professionals and any other services that come within the scope of fundraising via IPO. The portal hand holds you for the entire IPO Journey.
Generally, for the purposes of SME IPO, the company is valued at P/E multiple.
No, the company with a track record of 3 years is eligible for raising IPO. See Revised Eligibility Criteria.
NSE and SME stock exchanges both have the SME IPO platform. The company can be listed on either of them.
Both are good SME platforms. However as per the past records it is seen that higher size IPOs are listed on NSE.
All IPO funds are credited to the company. An IPO can have two components i.e. Fresh Issue and an Offer for Sale. Fresh Issue proceeds are received by the company and offer for sale proceeds goes to investors who are making an exit from the company.
No, the funds when raised are credited to the company at the Issue price only. Any movement in the share price post listing is reflected at the Investor's end.
Market making is a facility which provides an eligible 2-way bid and ask quotes for the SME shares listed and traded on the SME exchange. Generally 1.25-1.50% of the IPO size is reserved for market making.
Mainboard IPO:
As per the eligibility criteria for IPO by SEBI, ICDR regulations do not give any threshold for either an upper limit or lower limit on the fund raise.
In the year 2024, Hyundai Motor India Limited raised Rs 27870.16 crores through mainboard IPO. In contrast in 2024, Vibhor Steel Tubes Limited raised Rs 72.17 crores through mainboard IPO.
To list on the NSE for a Mainboard IPO, a company must have ₹10 crore paid-up capital, ₹25 crore market capitalization, a 3-year track record, and comply with legal requirements, with no insolvency or debt defaults.
To list on the BSE, the company must have ₹10 crore paid-up capital, raise at least ₹10 crore in the IPO, and have a ₹25 crore market capitalization post-issue.
For more details, please refer to Link https://www.ipoplatform.com/blogs/difference-between-mainboard-and-sme-ipo/127
SME IPO
To list on NSE Emerge and BSE SME, a company’s post-issue capital should not exceed to Rs 25 crore a 3-year track record, and profit in 2 of the last 3 years. The company must have, ₹1 crore net worth, ₹3 crore net tangible assets, and at least 1 year of operating profit or a 3-year track record from its predecessor.
For details on NSE SME eligibility, refer to Link https://www.ipoplatform.com/blogs/nse-sme-eligibility-criteria/135
For details on BSE SME eligibility criteria, refer to link https://www.ipoplatform.com/blogs/bse-sme-eligibility-criteria/134
Eligibility criteria for SME IPO also does not have any threshold for either upper limit or lower limit on the fund raise.
In the year 2024, Danish power limited raise Rs 197.90 Crores through SME IPO on NSE Emerge. In contrast in 2023, Shoora Designs Limited raised Rs 2.03 crores through SME IPO on BSE SME.
For details on NSE SME eligibility, refer to Link https://www.ipoplatform.com/blogs/nse-sme-eligibility-criteria/135
For details on BSE SME eligibility criteria, refer to link https://www.ipoplatform.com/blogs/bse-sme-eligibility-criteria/134
Valuation of a company for an IPO depends on several factors, including:
IPO valuation whether its Mainboard or SME are determined on the basis of company’s performance, financial position etc.
Thus, it’s hard to say whether a Mainboard or SME IPO will get a better valuation, as it depends on above factors.
When a company raises funds through an IPO (Initial Public Offering), following things should be kept in mind;
The merchant banker must have to provide the details of utilization to SEBI.
IPO advisors or SME IPO Consultants play a crucial role in guiding the company through the IPO process. They assist with structuring the offering, preparing necessary documentation, IPO pricing with fair valuations, ensuring regulatory compliance, due diligence activity, and helping market the IPO to potential investors. Their expertise ensures a smooth and successful public listing.
IPO platform in India provides information on upcoming IPOs on NSE Emerge and BSE SME and list of merchant bankers and anchor investors. Role of IPO advisor is important in the success of the listings.
IPO Advisors like IPOPlatform.com assist with valuation, documentation, regulatory approvals, merchant banker selection, and investor outreach, ensuring smooth listing and successful fundraising. Their expertise helps companies navigate SEBI compliance, market positioning, and post-listing strategies.
Yes, LLPs, Partnership Firms and Sole proprietorships are eligible to convert into public companies and their track record is considered for IPO eligibility. However, after converting into company there will be cooling period of one full financial year from the conversion in BSE SME and there are no such criteria for NSE Emerge.
To execute an IPO in Mainboard it takes approximately from 8 to 12 months and SME IPO it takes approximately 4 to 6 months.
Pre IPO-Issue also has to comply with SEBI ICDR regulations.
A pre-IPO company might get eventually listed on NSE Emerge, BSE SME or mainboard platform of the stock exchanges by fulfilling the NSE/BSE eligibility criteria. Best Merchant Bankers in India have the role and responsibility for launching IPO.
For further details refer this link https://www.ipoplatform.com/blogs/what-is-pre-ipo-investment-and-role-of-ipo-advisors/142
Yes, Private investors can buy shares from promoters before the IPO which is known as Pre-IPO funding also known as private placement.
For further details refer this link https://www.ipoplatform.com/blogs/private-placement-of-shares-in-pre-ipo/141
The IPO process begins with the company’s decision to go public, followed by hiring key advisors such as IPO advisors, investment bankers, legal experts, and auditors. IPO advisors assist in finalizing the Best merchant banker in India. The lead manager carries out the IPO process and files DRHP.
Top 10 Merchant Bnakers in India
Once SEBI/Stock Exchanges approves the DRHP, the company sets the price band or fixed price for shares and conducts a roadshow to generate investor interest.
Know more about DRHPs in detail.
After the IPO opens for subscription, investors can apply for shares, and the allotment will be made on the demand. Finally, the company’s shares are listed on the stock exchange, marking its entry into the public market.
In SME IPO, minimum dilution requirement is 25% to outsiders and 1.25% for market makers. However, there is no upper limit on the dilution. It is regulatory compliances for market maker to hold 1.25% of the shares to maintain the liquidity in the stocks.
Yes, all securities held by promoters must be in dematerialized form. Learn more about Pomoters amd Promoter's Group here
The eligibility criteria for SME IPO states that the company must have positive FCFE for at least two out of the last three financial years for listing on NSE Emerge platform of India. Calculate your FCFE Ratio for SME IPO Eligibility.
The Price-to-Earnings (P/E) multiple helps investors evaluate whether an SME IPO is fairly priced by comparing its valuation to industry peers. A high P/E suggests growth potential but may indicate overvaluation, while a low P/E signals affordability or weaker earnings prospects.
The Price-to-Earnings (P/E) multiple helps investors evaluate whether an IPO is fairly priced by comparing its valuation to industry peers. A high P/E suggests growth potential but may indicate overvaluation, while a low P/E signals affordability or weaker earnings prospects.
The P/E ratio is calculated as:
P/E Ratio = Issue Price ÷ Earnings Per Share (EPS)
It measures how much investors are willing to pay for each rupee of earnings, helping assess IPO attractiveness compared to industry benchmarks and financial performance.
Understand Importance of PE ratio in Detail.
A good P/E ratio depends on industry standards and growth prospects. Generally, a lower P/E (5-15x) suggests affordability, while a higher P/E (20x+) may indicate growth potential but could also signal overvaluation, requiring further analysis.
The Price-to-Earnings (P/E) ratio is a valuation metric showing how much investors are willing to pay per rupee of earnings. It helps compare a company’s market price to its profits, guiding investment decisions in IPOs and stock market investments.
IPO valuation considers financial performance, P/E ratio, industry comparison, revenue growth, debt levels, and market demand. Other factors include management quality, economic conditions, and investor sentiment, influencing whether an IPO is attractively priced for potential investors.
The minimum SME IPO size is typically around ₹5-150 crore, while there’s no strict upper limit. However, most SME IPOs raise up to ₹ 200 crore based on business requirements, investor demand, and exchange regulations.
SEBI's minimum IPO size in India is generally ₹10 Crores, though not strictly mandated. The maximum IPO size is capped at five times the company's pre-IPO net worth, ensuring proportionality. Exchange listing requirements and profitability can further influence size. Consult IPOPlatform.com for expert IPO advisory services in India.
The size of an IPO depends on factors like company valuation, growth potential, industry trends, market conditions, and investor demand. Regulatory requirements and promoter holdings also impact the issue size.
IPO costs include regulatory fees, underwriting fees, legal & compliance expenses, marketing costs, and merchant banker charges. Typically, IPO expenses range from 5% to 10% of the total issue size.
The post-issue paid-up capital should not exceed Rs 25 crores.
The company must have at least 3 full financial years of track record of business to list on NSE Emerge or BSE SME stock exchanges of India.
Net worth is the sum of paid up capital and reserves and surplus appearing in the balance sheet of a company. The eligibility criteria require the net worth to be at least Rs 3 crores for SME IPO for NSE Emerge. BSE SME listing requirement states that the net worth shall be Rs 1 crore for preceding two full financial years.
The company must have operating profits or EBITDA of at least Rs 1 crore for two out of the last three financial years. There is no threshold for turnover though.
As per BSE SME IPO eligibility and listing requirements debt should not exceed three times the equity. Hence, leverage ratio shall not be more than 3:1
Dematerialization refers to conversion of physical shares into digital and electronic form. This is done by RTA (Registrars to IPO)
Entities or individuals debarred from accessing the capital market, wilful defaulters, fraudulent borrowers, or fugitive economic offenders are not eligible.
Yes, the company can apply to multiple exchanges but must select one as the designated stock exchange whether BSE SME or NSE Emerge.
A promoter is named in DRHP or RHP and one who exercises control over a company's operations.
No, institutions like banks or mutual funds are only promoters if they meet specific SEBI conditions beyond just owning 20% of shares.
The promoter’s family, related companies, and certain entities like subsidiaries or firms where the promoter or their family holds a significant stake.
The promoter is the founder of the company who exercises control over the company, while non promoters are the minority shareholders.
MPC requires promoters to hold at least 20% of the post-issue capital, with exceptions for certain investors.
Promoters must meet the MPC requirement at least one day before the IPO opens.
Excess promoter holdings above the minimum requirement are released in two stages:
Intermediaries are the most important part of an IPO process. Lead managers, IPO Advisors, Registrar (RTA) to the Issue, Compliance Officer (Company Secretary) are the financial intermediaries in IPO Process.
Major merchant bankers in India for SME IPO includes Hem Securities, GYR Capital Advisors, Holani Consultants and others. Mainboard Merchant Bankers includes SBI Capital Markets, Kotak Mahindra Capital and ICICI Securities
The lead manager in charge of underwriting must fulfill underwriting obligations and notify underwriters of their responsibilities as per regulations.
The company issuing securities appoints the Registrar, often recommended by investment banks or underwriters.
Investors can contact the Registrar directly for assistance with allotment status, refund issues, or Demat account transfers
A listed company must comply with SEBI’s Listing Obligations and Disclosure Requirements (LODR) and it is usually handled by the in-house qualified Company Secretary as the Compliance Officer.
Due Diligence is an important part of IPO process. Due Diligence means investigating and verifying a company’s information to ensure compliance with laws and regulations, especially during business transactions like IPOs, mergers, or investments.
Experts like auditors, legal advisors, Merchant Bankers, and IPO advisors work together to navigate the process.
It usually takes 1 to 1.5 months, depending on the complexity of the business.
Adverse findings can delay the IPO process, but timely resolutions can get the process back on track.
A Peer Review Audit is an independent evaluation of an audit process done by firms (Practising firm) to ensure compliance with professional standards. In IPO, peer review audit is a mandatory compliance.
The Restated financial statements for the last three years and any stub period must be reviewed by a peer auditor for IPO listing requirements.
The Peer Review Audit ensures the accuracy, reliability, and regulatory compliance of the company’s financial statements for inclusion in the IPO offer document known as DRHP.
Only Chartered Accountants with at least 10 years of practice experience and valid certification from the ICAI Peer Review Board can perform Peer Review Audits. They are called Peer Review Auditors.
An adverse opinion must be reported, and the company must address the issues; a follow-up review may take 1-3 months to resolve concerns.
For small companies, it may take 2-4 weeks, while larger companies may take 2-3 months, depending on the complexity of the business.
DRHP is a preliminary document filed by a company planning to launch an IPO. It provides important details about the company’s business, financials, and risks before the IPO is approved.
It takes a minimum 3 months for an IPO to open after filing of DRHP. The relevant stock exchanges take time to examine and approve the DRHP.
DRHPs are available on SEBI’s official website, as well as the websites of the stock exchanges (NSE, BSE) and the company’s lead managers. One may also refer ipoplatform.com for a particular company’s DRHP.
DRHP is a preliminary document whereas RHP is a final version which contains all disclosures and comments as addressed at the time of review of DRHP.
The price band is the range within which investors can bid for shares during the book-building process. The price band must be announced at least two working days before the IPO opens, or earlier in pre-issue advertisements.
The IPO price is set based on demand, market conditions, and financial metrics like EPS and P/E ratio, in consultation with the merchant banker.
In a fixed price issue, the price is pre-decided, while in a book-built issue, the final price is determined through investor bidding.
IPO GMP (Grey market premium) is the price an investor is willing to pay above the IPO offer price in IPO Grey market. To be noted that GMP is used in unregulated markets and can be risky.
Differential pricing allows different prices for different investor categories, such as discounts for retail investors and employees.
RHP is the final IPO document filed with SEBI and the Registrar of Companies (ROC) before IPO opens.
UDRHP is a revised version of the Draft Red Herring Prospectus (DRHP) that includes all changes that are required by the stock exchange on examination of DRHP.
They ensure that all disclosures and changed suggested by the stock exchange are duly incorporated and provide investors with accurate and updated information regarding SME IPO.
RHP is typically filed 3-5 days before the IPO opens.
IPO price shall be announced at least two working days before the IPO opens in pre-issue advertisement for IPO.
Only after at least 90% of the offer is subscribed and verified by the lead manager (Merchant Banker) and RTA.
Shares are credited to investors Demat accounts, and any IPO refunds/unblocking of funds are done electronically.
The Registrar to the Issue (RTA) handles share allotment and refunds after the IPO closes.
Refunds for non- allotment of IPO are generally processed within 24-48 hours for ASBA applications after the IPO closes.