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The process for SME IPO includes suitability screening, appointment of investment bankers, due diligence, IPO prospectus preparation, road shows and marketing, pricing, IPO underwriting, listing, and post-IPO compliance. The process is comparatively simple; it just needs to be adapted from company to company, depending on the complexity of the company's finances and market conditions.
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SME IPO is a process by which small and medium enterprises can raise capital from the public and get listed on the stock exchange. In India, there are 2 platforms for SME IPO - BSE SME and NSE Emerge. An SME company can choose one of these platforms to go public.
An SME IPO process takes about 3 months from start to finish. Here are the timelines for the SME IPO.
Step |
Timeline |
Detail |
---|---|---|
Due-Diligence Process |
6-10 Weeks |
|
Filing & Regulatory Approval |
2-4 Weeks |
|
Issue Program |
2 Weeks |
|
Post Issue Formalities |
2 Weeks |
|
SME IPO is a process by which small and medium-sized companies can raise money from the general public and be listed on the stock exchange. For an issuing company, the SME IPO works as follows:
In this phase, the application process for the IPO begins.
The IPO is opened and closed as scheduled. Once the underwriting is completed, the company files the documents with the exchange so that the basis of allotment can be determined.
The BSE/NSE determines the basis of allotment and issues the notice of listing and trading.
Shares are transferred to investors' accounts and trading begins on the day of listing.
Based on the regulations, the company cooperates with a commercial bank and submits the required reports to the stock exchanges from time to time.
Below is a step-by-step guide to going public for SME companies:
The first step on the way to SME IPO is to check the eligibility criteria set by each stock exchange. For more details, please refer to the chapter SME IPO Eligibility Criteria. Also note, having all documents and submissions updated on time reduces the cost impact for an SME IPO.
The Company now appoints a merchant banker (lead manager). These are entities registered with SEBI to assist companies throughout the IPO process.
The merchant banker helps the company choose an exchange and engage other intermediaries such as bankers, registrars, market makers and underwriters.
The Merchant Banker's key responsibilities include:
The merchant banker completes the IPO application form and submits it to the stock exchange. Exchange authorities review records, conduct site visits and other investigations.
After that, the exchange approves the IPO application. This means that the issuing company meets all the requirements.
The merchant banker prepares the prospectus document (DRHP) and files it with the stock exchange. It takes about a month to prepare DRHP, as it contains a lot of information about the company and the public offering.
The Exchange issues an in-principle approval once the DRHP review process is complete.
The merchant banker files a red herring prospectus (RHP). The RHP document is an extension of the DRHP prospectus with additional details such as:
The Merchant Banker is now promoting the IPO to raise investor awareness. The merchant banker introduces the IPO. This includes physical and online meetings with investors in various cities.
The IPO will open and close as scheduled. Once the IPO opens, it can be determined if the IPO is oversubscribed or undersubscribed. This is tracked separately for each investor type (institutional, non-institutional, retail, etc.) and is available in real time on the exchanges' websites.
The IPO registrar, along with the exchange, is responsible for the allotment of shares. The IPO allotment status determines the number of shares allotted to investors in an IPO. The allotment status is published on the Registrar's website.
The Company shall publish an allotment basis setting out the details of the IPO allotment process.
The Stock Exchange publishes an announcement for the listing of IPO shares. The listing circular contains information such as the number of shares, type of security, closing price, ISIN, security code, symbol, etc.
The company's shares are traded on the stock exchange under a specially assigned ticker, ISIN number or script code.
The following reports should be submitted to the stock exchange after listing:
SME Company Owners
We could help you get listed on the stock market.
Check our SME IPO Guide
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