SME IPO

All About SME IPO

Ever wonder how a Small and Medium Enterprise (SME) raises capital? Well, one avenue they can choose is to go for an SME IPO. It is a bridge that connects SMEs To the world of public investment.

This not only benefits SMEs but also gives you new investment opportunities to consider. These IPOs opened doors to early-stage companies, unique sectors and growth potential. You can track SME IPO on Ticker for free from below pages: 

• Upcoming SME IPO
• Current SME IPO
• New Listed SME IPO 

Want to know more about SME IPOs? Well, here's everything you need to know to get started.

Introduction to SME IPO

SME IPO stands for Small and Medium Enterprises Initial Public Offering. With the help of an SME IPO, smaller companies can:

• Raise capital by offering shares to the public
• Get listed on specialised stock exchanges

It's not the same as traditional IPOs on the mainboard. An SME IPO is designed specifically to support Small and Medium Enterprises.

For an SME, launching an IPO is a huge milestone. With the help of an SME IPO, these companies can tap into funding sources beyond traditional lending methods. This is especially beneficial for small businesses that have high growth potential but limited resources. 

Here are some of the benefits of an SME IPO:

1. Access to Funding: Provides a reliable platform that allows these companies to raise capital and, in turn, helps them expand and develop.
2. Increased Visibility: Listed SMEs gain recognition, which enhances their credibility among business partners.
3. Growth Opportunities: With access to improved funding, SMEs can scale their operations, enter new markets and enhance their product offerings.

However, these are all benefits any company going public can enjoy. So, how is an SME IPO any different from a mainboard IPO?

Differences Between SME IPO and Mainboard IPO

An SME IPO has different terms of eligibility, issue size, minimum investment and regulatory compliance.

SME IPOs are made specifically for smaller companies. This makes them ideal for businesses in their early growth stages.

How to Invest in SME IPOs

You can apply for an SME IPO using UPI or an Application Supported by Blocked Amount (ASBA). However, there are some prerequisites to applying for an SME IPO:

• Must have a Demat account to hold the shares electronically
• Need a trading account to place “buy” orders
• Your bank account must be linked to your demat account
• You must have a UPI ID if you choose to apply via UPI

Here are the step-by-step guides on how you can apply for SME IPOs:

1. Applying through UPI

For investors looking to apply for SME IPOs, UPI is a very convenient method.

• Make sure that your broker supports UPI applications for SME IPOs
• Login to your trading platform and go to the IPO section
• Choose the SME IPO you want to invest in
• Enter the desired number of shares and bid price
• Provide the UPI ID, which is linked to your bank account
• Accept the terms and conditions and then submit your application
• Receive a mandate request on your UPI-enabled app: accept this to authorise fund blocking

After that, you just have to wait. If the shares are allotted to you, they will be credited to your Demat account. Keep in mind that retail investors can only apply for IPOs up to ?2 lakh using UPI.

2. Applying through ASBA

This method allows investors to apply for IPOs through their bank's net banking facility.

• Log in to your bank's net banking portal
• Find the ASBA or IPO option in the menu
• Enter the details of your Demat account 
• Specify the number of shares and bid price
• Submit the application before 3 pm on the IPO closing day

And that's it. The application amount will be blocked in your bank account until the allotment is finalised. If you are not allotted any shares, the funds will be released back to your account.

Views are listed on platforms such as NSE EMERGE and BSE SME. These exchanges are specially designed to cater to the needs of SMEs. However, before you jump the SME IPO gun, remember that while these IPOs often present high growth potential, they can carry certain risks due to:

• Limited liquidity
• Smaller market size

So, before investing in an SME IPO, you must consider the market volatility and regulatory challenges associated with smaller companies. Now, the question that comes to mind is,  “How can one check on upcoming and active SME IPOs?” 

Well, it is easy enough. You can explore live, upcoming and recently closed IPOs on Ticker! Here, you will also find IPO-related news, analysis and all the details you need to make smart investment decisions.

Why Investors Should Consider SME IPOs?

For the same reason, an investor considers any other IPO or investment opportunity. They provide exposure to emerging sectors and growth potential. Which is usually not seen in larger, more established companies. 

Here are 3 reasons why you can consider investing in an SME IPO:

• These companies are often high-growth businesses and can offer you potentially high returns.
• SMEs often have attractive valuations as they are priced competitively. That's why they offer good value for investors.
• They allow you to invest in niche sectors that often lack representation in the mainboard markets.

However, keep in mind that there are certain risks that come hand in hand with SME IPOs.

Risks Associated with SME IPOs

Someone aptly said, “No risk, no reward". While the benefits of an SME IPO are quite appealing, it is essential to understand that they are not without their risks. So before you invest in an IPO, understand:

• Volatility: Due to the smaller market size, SME stocks can potentially experience significant price fluctuations.
• Liquidity Concerns: SME shares have low trading volumes, and hence, it may be harder for you to buy or sell them.
• Regulatory Challenges: Getting listed is often associated with stricter regulatory compliances. This can affect the operations and stability of an SME.

You can reduce the amount of risk you expose yourself to by reviewing the IPO documents. Read the Draft Red Herring Prospectus (DHRP) thoroughly, as it contains crucial information on the company's business model, financial health, and future plans for growth.

Another thing you can do to mitigate risk is to analyse SMEs. Understanding the financials and business fundamentals can help you decide if an SME IPO is worth it or not.

So there you have it! Now you know everything there is to know about SME IPOs. They have the potential to become a great investment opportunity for investors. It also helps SMEs grow. It is a chance for them to raise capital and expand their reach in the marketplace.

But if you are considering diving into the world of SME IPOs, remember to do your homework. Thoroughly review the DHRP and analyse the fundamentals of the company. Also, make sure that you understand the risks associated with an SME IPO. 

You can get all the information you need to make an informed decision with Finology Ticker. You can also keep track of the latest SME IPOs on Ticker and stay ahead of the game. 

FAQs on SME IPOs

1. What’s the minimum investment for SME IPOs?
The minimum investment is typically higher than mainboard IPOs to support liquidity.

2. Can retail investors buy SME IPOs?
Yes, but keep an eye on the risks, given the limited liquidity in SME markets.

3. Are SME IPOs risky?
Yes, but understanding the market, company fundamentals, and the DRHP can help.