Introduction
In the dynamic world of stock markets and investments, it’s important to grasp the differences between SME IPOs (Small and Medium-Enterprises Initial Public Offerings) and Main Board IPOs. These two ways offer companies diverse opportunities to access the stock market. Let’s go into the details, with a bit of historical context.
Small and medium enterprises (SME) IPO
SME IPOs are designed to cater to smaller companies, typically those in their early stages. In India, the SME Exchange, which was launched on March 13, 2012, by the BSE SME (Bombay Stock Exchange) and National Stock Exchange was launched ON 2012 NSE emerge, serves as a focused platform for SME IPOs. Companies opting for SME IPOs often have less stringent financial requirements, which helps easier entry for smaller businesses looking to raise capital
Main line Initial public offering(IPO)
Main Board IPOs have a focus for larger, well-established companies. These firms usually have a more major market presence and financial strength. India’s primary stock exchanges, the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), host Main Initial IPOs. These IPOs entail more rigorous listing and financial criteria, given the broader scale and higher investor expectations.
Mainboard IPO vs SME IPO
| Aspect | SME IPO | Main Board IPO |
|---|---|---|
|
Rules for IPO eligibility |
Relaxed eligibility standards for SME IPOs include a few requirements. |
For mainboard IPOs, SEBI has established strict and complicated issue eligibility standards and rules.
|
|
Capital after-issue paid-up |
The SME business must have a post-issue paid-up capital of at least Rs 1 crore and a maximum of Rs 25 crore after the issuance.
|
Companies that want to list on the BSE and NSE markets must have at least Rs 10 crore in post-issue paid-up capital. |
|
Minimum application lot size for an IPO |
A SME IPO has a very high minimum application size of Rs 100,000 and above |
The minimum application value for Mainboard IPOs is typically between Rs. 10,000 and Rs. 15,000 |
|
IPO Timeline
|
A SME IPO is released to the public in 3 to 4 months. |
Public offering of a Main Board IPO might take up to 6 months. |
|
Reporting |
SME businesses that are required to report must audit their half-yearly financial accounts. |
The Main Board IPO must audit its quarterly financial reports. |
|
IPO Underwriting |
Mandatory (underwritten to 100% with 15% from a merchant banker) |
Non-mandatory (less than 50% of subscribers must be QIBs)
|
Conclusion
SME IPOs and Main Board IPOs offer distinct opportunities in the stock market landscape. SME IPOs, with fewer regulatory requirements, are ideal for smaller businesses, while Main Board IPOs, with their stringent criteria, appeal to established companies.
This understanding is important for both investors and companies considering going public, as it allows them to make informed decisions based on their financial status and aspirations.
The launch of the SME Exchange in 2012 marked a significant development in providing smaller companies a more accessible path to the stock market.
Frequently Asked Questions
SME IPO is for smaller companies with lower requirements and is listed on dedicated exchanges, while Main Board IPO is for larger, more established companies, listed on the primary stock exchange with stricter rules and higher capital raising potential.
- SME IPOs carry higher risk due to the smaller size and market presence of SMEs.
- Main Board IPOs generally offer more stability and potential for higher returns.
- SME IPOs generally have a quicker and simpler IPO process.
- Main Board IPOs often involve a more extended and complex process due to regulatory requirements.
- SME IPOs have relaxed eligibility criteria, making it easier for smaller companies to go public.
- Main Board IPOs have stricter criteria, requiring higher revenue, profitability, and market capitalization.
- SME IPOs may experience lower liquidity and trading volumes.
- Main Board IPOs usually have higher liquidity and trading activity.
