SMEs are Small and Medium Enterprises, an innate part of India’s economy. SMEs are essential contributors to India’s socio-economic development. The revenue, assets and the number of employees when are below a specific cut-off level, come under SMEs. Attaining capital and finance is one of the biggest challenges that SMEs face. It is also one of the major reasons for them to often go out of business.
Every company needs funds for expansion, be it a small or a big company. Either one takes a loan for this purpose or by raising funds from the public via IPO (initial public offering).
In this article, you’ll learn how SME IPOs (Small Medium Enterprise-Initial Public Offering) are helpful, how their listing work and how you can invest in an SME IPO.
What is an SME IPO?
To raise funds from various investors, Indian SME companies announce IPOs at the BSE SME and NSE EMERGE platforms. This way, the SME stocks get listed on the indices, traded and exchanged. SME IPO allows fundraising via public issues.
The SMEs need to register with SEBI (Securities & Exchange Board of India) for the listing on SME IPO and start the process of selling the securities (Shares). When the SEBI gives the green signal, SME IPO becomes public for every investor.
Let’s look at the criteria that SMEs require to get listed in SME IPO in India.
Key Features Of Indian SME IPO
- The minimum post-issue capital of the SME must be 1 crore
- The company’s post-issue-paid-up capital should be 3 crore and less than 25 crore
- According to the Companies Act 2013, Section 124, the SME must be able to show distributable profits for at least 2 of the preceding financial years. This excludes the extraordinary income.
- The minimum trading lot size of SMEs ranges from 100 to 10,000, as per the SEBI guidelines.
How Can You Subscribe For an SME IPO in India?
Contact A Broker
Mode: Online/Offline
Connect with a broker, to get the form and fill in the details considering the above-mentioned criteria.
ASBA
Mode: Online
ASBA (Application Supported By Blocked Amount) is developed by SEBI, for the IPO application process. To get listed, you need to Have a Demat Account. Details like Demat Account number, PAN Number, Bidding information, etc. would be required.
UPI
Mode: Online
You can apply for the IPO with your UPI ID through any Demat Account app.
Listing Criteria For SME IPO
- SMEs should have a public holding of a minimum of 25%
- There should be minimum of the subscribers is 50 investors
- The minimum trading lot for SME IPOs is Rs.1Lakh
- Necessary underwriting (at least 15% done by mortgaged-backed securities in their account)
- The offer document is not subject to SEBI’s registration
- The market making is done (exchange by market makers), registered for a minimum of 3 years
How to Invest in an SME IPO?
To invest in SME IPOs, you need to research the company thoroughly. If the fundamentals are strong and if you can see remarkable potential backed by data, then you should invest in it mindfully.
Just like listing, you need to have a Demat Account for investing in the SME IPO. You can invest through online Demat account apps like Zerodha, Upstox, Motilal Oswal, etc.. You will get a one-time password that you need to enter.
After verification, you can fill out the form to open the account. In the IPO section, you can apply to any SME IPO that can help you reap profits. You can connect with genuine financial experts, like we have in Value4Money. For personalised guidance on which IPO to invest in or how to expand your financial portfolio through Mutual Funds, PMS, equity and derivatives we can help you! Connect with us at 9825107677 or mail us at [email protected].
Impact Of SME IPO
SMEs can drive economic growth in the country. SME IPOs can enhance the capital flow and encourage them to expand their space in the current market conditions. In the evolving times of the Indian economy, SME IPOs form an important growth driver. SME IPOs become a robust part of the evolving entrepreneurial ecosystem in India.
Job Opportunities
SME IPOs help the companies to raise the funds, for growth and expansion. As capital increases, it would encourage job creation in various sectors of the company.
Advancement in Technology
The fundraising via public issues of SME companies also enables them to explore and implement technological upgrades in the current market. It would help SMEs enhance their productivity, tech know-how and competitiveness
Nurture Entrepreneurial Ecosystem
SME IPOs have the ability to foster an entrepreneurial ecosystem by wealth creation, growth and expansion, increasing market competitiveness and innovation. This financing avenue can help the SMEs transcend and branch out in their respective fields.
Opens Opportunities For Investors
SME IPOs provide opportunities to garner confidence in investors in the SME sector. Due to a conducive environment with proper regulations and a systematic system of SME IPOs, retail and institutional investors now show interest in investing in SMEs.
