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What is SME IPO in India?

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Small and medium enterprises (SMEs) are the major contributor to Indian Economy. They provide employment to over 40% of workforce in India and contribute around 45% of manufacturing output (as of Dec 2014).

In India, due to their low scale and poor adoption of technology, SMEs have very poor productivity. Financing is the biggest challenge and the lack of it is the main reason for an SME going out of business.

SME is a separate platform opened up by Stock Exchanges in India to help SMEs to raise fund through investors in stock market.

Bombay Stock Exchange BSE, countries oldest stock exchange offers platform called 'BSE SME' for SMEs.

National Stock Exchange (NSE), the largest stock exchange in India offers platform called 'EMERGE' for SMEs.

For SME stocks to get listed and being traded on exchange, company has to come up with an Initial Public Offer (IPO) at exchnage's SME platform. IPO is one of the popular way for companies to raise fund from investors and get listed on exchanges.

Following are some of the criteria's / facts about SMEs to raise fun though IPO:

  • For SME IPO the company should have a paid up capital of Rs 3 crore and the same should be the net worth as well as its net tangible assets.
  • Companies should have at distributable profits in terms of Section 124 of the Companies Act 2013, least two years of our immediately preceding three financial years (excluding extraordinary income).
  • For SME IPOs, as per SEBI guidelines minimum trading lot varies from 100 to 10000 depending upon the price band of the issue. Such lots are reviewed periodically and adjusted depending upon it s price movements, post listings.
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