What\u00a0is an IPO?<\/strong>\u00a0<\/h2>\n\n\n\nAn\u00a0Initial\u00a0Public Offering (IPO)<\/a><\/strong>\u00a0is the first time a private company sells its shares to the\u00a0general public,\u00a0in order to\u00a0raise money for growth, expansion, or paying off existing obligations. Once listed, anyone with a demat account can buy or sell that company’s shares on a stock exchange.\u00a0<\/p>\n\n\n\nIn India, every IPO falls into one of two categories, based on the size of the company: a Mainboard IPO<\/strong> or an SME IPO<\/strong>. <\/p>\n\n\n\nThe Core Difference in One Line<\/strong>\u00a0<\/h2>\n\n\n\nA Mainboard IPO is generally meant for larger companies listing on the main platform of the NSE or BSE, with SEBI reviewing the draft offer document under the applicable regulatory framework. An SME IPO is generally meant for eligible small and medium enterprises listing on the NSE Emerge or BSE SME platforms, where the stock exchange reviews the offer documents, with SEBI performing a supervisory role under the regulatory framework. <\/p>\n\n\n\n
That one distinction \u2014 who reviews the company, and how big it needs to be \u2014 is the root of almost every other difference between the two. <\/p>\n\n\n\n
SME IPO vs Mainboard IPO: Full Comparison Table<\/strong><\/h2>\n\n\n\nParameter<\/strong><\/th>Mainboard IPO<\/strong>\u00a0<\/th>SME IPO<\/strong>\u00a0<\/th><\/tr><\/thead>Listing Platform<\/strong> <\/td>NSE \/ BSE main board <\/td> NSE Emerge \/ BSE SME <\/td><\/tr> Post-Issue Paid-Up Capital<\/strong> <\/td>Generally \u20b910 crore or more <\/td> Between \u20b91 crore and \u20b925 crore <\/td><\/tr> Document Review<\/strong> <\/td>Reviewed directly by SEBI <\/td> Reviewed by the stock exchange, with SEBI in a supervisory role <\/td><\/tr> Track Record Required<\/strong> <\/td>Broadly, a multi-year profitability\/net worth history under SEBI’s ICDR norms (with alternate routes for high-growth, pre-profit companies) <\/td> Operating profit (EBITDA) of at least \u20b91 crore in 2 of the last 3 financial years, or a minimum net worth requirement if not <\/td><\/tr> Underwriting<\/strong> <\/td>Not mandatory <\/td> 100% underwriting is mandatory <\/td><\/tr> Market Making<\/strong> <\/td>Not compulsory <\/td> Mandatory for a minimum of 3 years post-listing <\/td><\/tr> Financial Disclosures<\/strong> <\/td>Quarterly <\/td> Half-yearly <\/td><\/tr> Typical Process Time<\/strong> <\/td>Varies depending on regulatory review and issuer readiness <\/td> Varies depending on exchange review and issuer readiness <\/td><\/tr> Minimum Application Size<\/strong> <\/td>Roughly \u20b914,000\u2013\u20b915,000 <\/td> Roughly \u20b92 lakh (raised in recent SEBI reforms) <\/td><\/tr> Retail Investor Category<\/strong> <\/td>Generally up to 35% of the issue (for profitable companies) <\/td> At least 50% of the issue <\/td><\/tr> Secondary Market Trading<\/strong> <\/td>Can trade in single-share multiples <\/td> Must trade in fixed lot sizes, even after listing <\/td><\/tr> Investor Base<\/strong> <\/td>Retail investors, HNIs, and institutional investors (QIBs) <\/td> Mostly retail investors and HNIs; institutional participation is limited <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nMainboard IPO Explained<\/strong> <\/h2>\n\n\n\nA Mainboard IPO is what most people picture when they think of a company “going public.” These are generally larger companies with a longer operating history that list on the main platform of the NSE or BSE. <\/p>\n\n\n\n
Eligibility, broadly speaking:<\/strong> SEBI’s ICDR (Issue of Capital and Disclosure Requirements) regulations require companies to demonstrate a meaningful financial track record \u2014 this generally includes minimum net worth and operating profit criteria built up over several preceding years, along with a post-issue paid-up capital that’s usually \u20b910 crore or higher. Companies that don’t meet the standard profitability route may still list through an alternate route, but with tighter restrictions on institutional allocation. <\/p>\n\n\n\nOversight:<\/strong> The draft prospectus (DRHP) for a Mainboard IPO is reviewed directly by SEBI, which can raise observations, seek clarifications, or delay the offer until its concerns are addressed. This is one of the factors that may influence the overall timeline for a Mainboard IPO. <\/p>\n\n\n\nInvestor experience:<\/strong> Application sizes are relatively affordable \u2014 usually in the range of \u20b914,000\u2013\u20b915,000 for one lot \u2014 and once listed, shares can be bought or sold in any quantity, including single shares. Liquidity is generally strong, since these companies attract both retail and institutional participation. <\/p>\n\n\n\nSME IPO Explained<\/strong> <\/h2>\n\n\n\nAn SME (Small and Medium Enterprise) IPO allows eligible small and medium enterprises to raise capital through the SME listing framework, listing on the NSE Emerge<\/strong> or BSE SME<\/strong> platforms rather than the main exchange boards. <\/p>\n\n\n\nEligibility:<\/strong> Following SEBI’s tightened norms, an SME company must generally show an operating profit (EBITDA) of at least \u20b91 crore in at least 2 of the preceding 3 financial years. If it cannot meet this profitability threshold, it must instead demonstrate a minimum net worth. The company’s post-issue paid-up capital must stay between \u20b91 crore and \u20b925 crore \u2014 cross that \u20b925 crore ceiling, and the company no longer qualifies for the SME platform and must pursue a Mainboard listing instead. <\/p>\n\n\n\nOversight:<\/strong> Unlike a Mainboard IPO, the offer document for an SME IPO is examined and approved by the relevant stock exchange, not SEBI directly. SEBI’s role here is supervisory. This is exactly why SME prospectuses often carry a standard disclaimer clarifying that SEBI has not recommended or vetted the offer. <\/p>\n\n\n\nAdditional Regulatory Requirements:<\/strong> SME IPOs are subject to certain additional regulatory requirements under the applicable regulatory framework. These include mandatory underwriting of the issue and the appointment of a market maker for a minimum period of three years after listing. These requirements are intended to support the SME listing framework and post-listing market functioning. <\/p>\n\n\n\nWhy SME IPO Rules Have Gotten Stricter?<\/strong> <\/h2>\n\n\n\nThe SME segment has witnessed strong growth in recent years, with several issues attracting high subscription levels. That growth also led to certain regulatory concerns: instances of companies diverting IPO proceeds to related parties, inflating revenues through circular transactions between group entities, and in at least one publicly reported case, an SME IPO being cancelled by SEBI altogether after evidence of fund misuse came to light. <\/p>\n\n\n\n
In response, SEBI introduced a set of tighter rules for SME issuers, including: <\/p>\n\n\n\n
\n- A firmer\u00a0profitability requirement<\/strong>\u00a0(operating\u00a0profit of at least \u20b91 crore in 2 of the last 3 years) instead of relying on revenue growth alone.\u00a0<\/li>\n<\/ul>\n\n\n\n
\n- A\u00a0cap on how much\u00a0promoters can sell<\/strong>\u00a0during the IPO \u2014\u00a0generally limited\u00a0to 20% of the total issue size, and no more than 50% of their overall holding.\u00a0<\/li>\n<\/ul>\n\n\n\n
\n- A\u00a0restriction on using IPO\u00a0proceeds<\/strong>\u00a0to repay loans owed to\u00a0promoters or related parties.\u00a0<\/li>\n<\/ul>\n\n\n\n
\n- A\u00a0cap on funds earmarked for “general corporate purposes,”<\/strong>\u00a0to reduce the risk of vaguely justified spending.\u00a0<\/li>\n<\/ul>\n\n\n\n
\n- A\u00a0higher\u00a0minimum application size and a\u00a0higher\u00a0minimum number of public allottees<\/strong>, intended to ensure only genuinely informed investors\u00a0participate, and that ownership is\u00a0reasonably spread\u00a0out.\u00a0<\/li>\n<\/ul>\n\n\n\n
SEBI has introduced additional regulatory measures for SME IPOs to strengthen the SME listing framework. However, investors should evaluate each IPO independently by reviewing the offer document, financial information, business model, objectives of the issue and associated risk factors before making an investment decision.<\/p>\n\n\n\n![\"\"\/](\"https:\/\/d1l8l3rp33cdzs.cloudfront.net\/images\/naviacee\/Open-free-demat-account%20%28blog%29%20%281%29.gif\")
<\/a><\/figure>\n\n\n\nMinimum Investment: The Biggest Practical Difference<\/strong> <\/h2>\n\n\n\nFor most first-time investors, this is where the two categories feel most different in everyday terms. <\/p>\n\n\n\n
In India, every IPO falls into one of two categories, based on the size of the company: a Mainboard IPO<\/strong> or an SME IPO<\/strong>. <\/p>\n\n\n\n A Mainboard IPO is generally meant for larger companies listing on the main platform of the NSE or BSE, with SEBI reviewing the draft offer document under the applicable regulatory framework. An SME IPO is generally meant for eligible small and medium enterprises listing on the NSE Emerge or BSE SME platforms, where the stock exchange reviews the offer documents, with SEBI performing a supervisory role under the regulatory framework. <\/p>\n\n\n\n That one distinction \u2014 who reviews the company, and how big it needs to be \u2014 is the root of almost every other difference between the two. <\/p>\n\n\n\n A Mainboard IPO is what most people picture when they think of a company “going public.” These are generally larger companies with a longer operating history that list on the main platform of the NSE or BSE. <\/p>\n\n\n\n Eligibility, broadly speaking:<\/strong> SEBI’s ICDR (Issue of Capital and Disclosure Requirements) regulations require companies to demonstrate a meaningful financial track record \u2014 this generally includes minimum net worth and operating profit criteria built up over several preceding years, along with a post-issue paid-up capital that’s usually \u20b910 crore or higher. Companies that don’t meet the standard profitability route may still list through an alternate route, but with tighter restrictions on institutional allocation. <\/p>\n\n\n\n Oversight:<\/strong> The draft prospectus (DRHP) for a Mainboard IPO is reviewed directly by SEBI, which can raise observations, seek clarifications, or delay the offer until its concerns are addressed. This is one of the factors that may influence the overall timeline for a Mainboard IPO. <\/p>\n\n\n\n Investor experience:<\/strong> Application sizes are relatively affordable \u2014 usually in the range of \u20b914,000\u2013\u20b915,000 for one lot \u2014 and once listed, shares can be bought or sold in any quantity, including single shares. Liquidity is generally strong, since these companies attract both retail and institutional participation. <\/p>\n\n\n\n An SME (Small and Medium Enterprise) IPO allows eligible small and medium enterprises to raise capital through the SME listing framework, listing on the NSE Emerge<\/strong> or BSE SME<\/strong> platforms rather than the main exchange boards. <\/p>\n\n\n\n Eligibility:<\/strong> Following SEBI’s tightened norms, an SME company must generally show an operating profit (EBITDA) of at least \u20b91 crore in at least 2 of the preceding 3 financial years. If it cannot meet this profitability threshold, it must instead demonstrate a minimum net worth. The company’s post-issue paid-up capital must stay between \u20b91 crore and \u20b925 crore \u2014 cross that \u20b925 crore ceiling, and the company no longer qualifies for the SME platform and must pursue a Mainboard listing instead. <\/p>\n\n\n\n Oversight:<\/strong> Unlike a Mainboard IPO, the offer document for an SME IPO is examined and approved by the relevant stock exchange, not SEBI directly. SEBI’s role here is supervisory. This is exactly why SME prospectuses often carry a standard disclaimer clarifying that SEBI has not recommended or vetted the offer. <\/p>\n\n\n\n Additional Regulatory Requirements:<\/strong> SME IPOs are subject to certain additional regulatory requirements under the applicable regulatory framework. These include mandatory underwriting of the issue and the appointment of a market maker for a minimum period of three years after listing. These requirements are intended to support the SME listing framework and post-listing market functioning. <\/p>\n\n\n\n The SME segment has witnessed strong growth in recent years, with several issues attracting high subscription levels. That growth also led to certain regulatory concerns: instances of companies diverting IPO proceeds to related parties, inflating revenues through circular transactions between group entities, and in at least one publicly reported case, an SME IPO being cancelled by SEBI altogether after evidence of fund misuse came to light. <\/p>\n\n\n\n In response, SEBI introduced a set of tighter rules for SME issuers, including: <\/p>\n\n\n\n SEBI has introduced additional regulatory measures for SME IPOs to strengthen the SME listing framework. However, investors should evaluate each IPO independently by reviewing the offer document, financial information, business model, objectives of the issue and associated risk factors before making an investment decision.<\/p>\n\n\n\n For most first-time investors, this is where the two categories feel most different in everyday terms. <\/p>\n\n\n\nThe Core Difference in One Line<\/strong>\u00a0<\/h2>\n\n\n\n
SME IPO vs Mainboard IPO: Full Comparison Table<\/strong><\/h2>\n\n\n\n
Parameter<\/strong><\/th> Mainboard IPO<\/strong>\u00a0<\/th> SME IPO<\/strong>\u00a0<\/th><\/tr><\/thead> Listing Platform<\/strong> <\/td> NSE \/ BSE main board <\/td> NSE Emerge \/ BSE SME <\/td><\/tr> Post-Issue Paid-Up Capital<\/strong> <\/td> Generally \u20b910 crore or more <\/td> Between \u20b91 crore and \u20b925 crore <\/td><\/tr> Document Review<\/strong> <\/td> Reviewed directly by SEBI <\/td> Reviewed by the stock exchange, with SEBI in a supervisory role <\/td><\/tr> Track Record Required<\/strong> <\/td> Broadly, a multi-year profitability\/net worth history under SEBI’s ICDR norms (with alternate routes for high-growth, pre-profit companies) <\/td> Operating profit (EBITDA) of at least \u20b91 crore in 2 of the last 3 financial years, or a minimum net worth requirement if not <\/td><\/tr> Underwriting<\/strong> <\/td> Not mandatory <\/td> 100% underwriting is mandatory <\/td><\/tr> Market Making<\/strong> <\/td> Not compulsory <\/td> Mandatory for a minimum of 3 years post-listing <\/td><\/tr> Financial Disclosures<\/strong> <\/td> Quarterly <\/td> Half-yearly <\/td><\/tr> Typical Process Time<\/strong> <\/td> Varies depending on regulatory review and issuer readiness <\/td> Varies depending on exchange review and issuer readiness <\/td><\/tr> Minimum Application Size<\/strong> <\/td> Roughly \u20b914,000\u2013\u20b915,000 <\/td> Roughly \u20b92 lakh (raised in recent SEBI reforms) <\/td><\/tr> Retail Investor Category<\/strong> <\/td> Generally up to 35% of the issue (for profitable companies) <\/td> At least 50% of the issue <\/td><\/tr> Secondary Market Trading<\/strong> <\/td> Can trade in single-share multiples <\/td> Must trade in fixed lot sizes, even after listing <\/td><\/tr> Investor Base<\/strong> <\/td> Retail investors, HNIs, and institutional investors (QIBs) <\/td> Mostly retail investors and HNIs; institutional participation is limited <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Mainboard IPO Explained<\/strong> <\/h2>\n\n\n\n
SME IPO Explained<\/strong> <\/h2>\n\n\n\n
Why SME IPO Rules Have Gotten Stricter?<\/strong> <\/h2>\n\n\n\n
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<\/a><\/figure>\n\n\n\nMinimum Investment: The Biggest Practical Difference<\/strong> <\/h2>\n\n\n\n
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