The initial public offering of a small or medium-sized business is referred to as a SME-IPO (IPO). It's a term used to describe the buying and selling of stock in small and medium-sized enterprises. Companies having revenues, assets, or workforces less than a specific threshold are known as small and medium-sized companies (SMEs). Depending on the industry, a small business is defined differently.
Small and medium-sized enterprises (SMEs) in India employ the majority of the country's labour force, making them an essential aspect of the country's economy. Because the companies involved are small or medium-sized, the offering that opens is substantially less than those that are listed on the main exchange platforms of the BSE and NSE.
The BSE SME platform (BSE) and the EMERGE Platform (NSE) were launched in the year 2012. For SME listing, the stock exchanges have their own set of qualifying standards in addition to the SEBI guidelines. Currently, the BSE has around 300 firms listed, while the NSE Emerge has over 180.
SME IPO vs Traditional IPO
An IPO requires quarterly reporting of results, but a SME IPO requires biannual reporting following the IPO.
While the minimum allotment for an IPO is 100, the same quantity is just 50 for SME IPOs.
Investments of 12,000 to 15,000 are typically required for a traditional initial public offering. However, small and medium-sized enterprises (SMEs) IPOs vary from 1,20,000 to 1,50,000. This is because SME IPOs may only be taken part in by long-term and capital-intensive investors.
If you're a SME looking to go public, you'll need to submit an IPO application that's at least Rs.100,000, which is substantially more than the Rs.10,000 to Rs.15,000 ordinary IPO application.
Criteria for SME-IPO offering issuance
Only companies that meet specific SEBI requirements are allowed to issue IPOs in the SME-IPO category:
Section 124 of the Companies Act, 2013, mandates that a firm must be able to show that it has distributed earnings in at least two of the last 3 financial years.
According to the most recent audited financial reports, the post-issue capital should contain tangible assets of at least 3 crore and be in the range of 3 crore to 25 crore.
The minimum trading bit for SME IPOs varies from 100 to 10,000 according to SEBI rules, depending on the price band. According to price fluctuations, these are re - evaluated and updated on an ongoing basis.
How can you apply for a SME-IPO?
An offline ASBA process is available to investors who want to apply for SME-IPO. The online option for the same has not yet been made accessible.
Visit the bank's ASBA branch in your area for further information. To use this service, the investor must be a customer of that bank's branch network.
Download the ASBA application form on the NSE/BSE websites or through your broker.
Complete and submit the application form with all necessary information, such as your PAN number and your bank account number.
It is the bank's responsibility to hold that money and send it to stock exchange for that IPO when the investor completes the form and sends it in.
Small and medium-sized enterprises (SMEs) are essential for India's economic growth and for the creation of jobs, and the Indian market looks to be favourable for SME-IPOs owing to the backing of a large number of investors.
Any initial public offering (IPO), SME or Traditional ipo, carries risks. SME IPOs, on the other hand, carry a higher degree of risk. As part of the application process, prospective investors are required to conduct extensive due diligence on the company.
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