Small and Medium Enterprises (SMEs) have started to pick up pace in Initial Public Offerings (IPOs) to raise funds and fuel their growth trajectory. As an integral component of the Indian financial ecosystem, SME IPOs offer an insightful lens into the market and present good investment opportunities for investors in stock markets.

In this blog, we will describe the intricacies of SME IPOs, shedding light on their significance, benefits, risks, and the procedures involved in applying for these IPOs as an investor.

What is an SME IPO?

A SME IPO refers to the process through which small and medium-sized companies issue shares to the public for the first time, aiming to raise capital and expand their operations. 

Unlike Mainboard IPOs, SME IPOs cater specifically to the financial needs and growth aspirations of smaller enterprises in India.

Difference between SME IPOs and Mainboard IPOs

The key differentiating factors between SME IPOs and Mainboard IPOs lie in their eligibility criteria, issue size, underwriting requirements, and market regulations. 

SME IPOs are tailored to the specific needs of small and medium-sized enterprises, with more relaxed eligibility norms and reduced compliance burdens compared to their Mainboard counterparts.

Benefits of investing in SME IPOs

Investing in SME IPOs offers investors the prospect of early-stage investment opportunities, potential higher returns, and diversification benefits within their investment portfolios. 

Additionally, supporting the growth of SMEs can contribute to the development of the local economy and foster entrepreneurship in the country.

Risks associated with investing in SME IPOs

While SME IPOs present lucrative investment opportunities, they also come with inherent risks, including lower liquidity, higher volatility, and the potential for lower investor awareness. 

Investors must carefully evaluate the financial health, business model, and growth prospects of the SME before making investment decisions.

Applying for an SME IPO

To apply for an SME IPO you will need to follow these steps:

  • Open a demat and trading account with a broker like Share.Market that is registered with the Securities and Exchange Board of India (SEBI)
  • Once your account is open, you can apply for the IPO through the IPO application feature in the mobile application or web application
  • During the IPO subscription period, you can place a bid for the shares that you want to buy
  • After this you can set up a UPI mandate of up to ₹2 lakh and complete your application.

(Note: For applications beyond ₹2 lakh you will need to use ABSA facility provided by your registered bank linked with the broker)

  • If your bid is accepted, you will be allocated shares in the IPO
  • The shares will be credited to your demat account after the IPO closes

Factors to consider when selecting SME IPOs for investment

Investors need to consider various factors such as the company’s financial performance, Growth prospects, Industry trends, Credibility of the management team when selecting SME IPOs for investment. 

Conducting thorough due diligence and market research can help investors make informed investment decisions and mitigate potential risks.

Risks and challenges of applying for an SME IPO

Apart from the potential investment risks, applying for an SME IPO involves certain challenges such as market volatility, regulatory changes, and the company-specific risks associated with SMEs.

Investors need to be aware of these challenges and develop a well-thought-out investment strategy that accounts for potential uncertainties and market fluctuations.


SME IPOs play a vital role in nurturing the growth and development of small and medium-sized enterprises in India, offering companies a platform to raise capital and investors an avenue for early-stage investment opportunities. 

Understanding the intricacies of SME IPOs, from their eligibility criteria to the application process and investment considerations, can empower both companies and investors to make informed decisions and leverage the potential of the Indian capital market. 

How do SME IPOs contribute to the growth of small and medium-sized enterprises in India?

SME IPOs provide a platform for these businesses to raise capital, fostering their growth and development. They also offer investors an avenue for early-stage investment opportunities, thereby contributing to the overall development of the Indian capital market.

What is an SME IPO and how does it differ from a Mainboard IPO?

SME IPOs allow small and medium-sized companies to issue shares to the public, aiding in capital generation and expansion. In contrast, Mainboard IPOs are geared towards larger enterprises and adhere to stricter regulatory requirements and larger issue sizes.

How do changes in industry-specific trends influence the valuation and performance of SME IPOs?

Monitoring industry-specific trends and their influence on the valuation and performance of SME IPOs can provide investors with a comprehensive understanding of the market dynamics specific to various sectors. Assessing these trends can aid investors in making informed investment choices aligned with the evolving market landscape.