SME IPO stands for Small and Medium Enterprises Initial Public Offering. It’s a way for small businesses to raise money from investors by offering them shares (ownership) in the company. It’s like asking investors to buy a piece of the company to help it grow. These shares are listed on special platforms like NSE Emerge or BSE SME, designed for smaller companies. SME IPOs are specifically designed to cater to the fundraising needs of smaller companies with less stringent requirements than a mainboard IPO.
A company needs money to expand, buy new equipment, pay off loans, or grow its business. Instead of taking loans, they sell ownership (shares) to the public. People can buy shares of the company when it launches the IPO. The minimum investment amount is usually higher than big-company IPOs (e.g., ₹1 lakh or more).
The eligibility criteria for Listing SME IPO on:
BSE
NSE
The NSE Emerge platform has specified certain conditions that a company must meet to issue an SME IPO:
- The company must be registered under India’s Companies Act 1956 or 2013.
- The company needs to have a track record (operations) of at least three years.
- The promoters must collectively or individually hold at least 20% of the share capital after the issue.
- One of the promoters should possess at least three years of experience in the same industry.
- The company must have operating profit and a positive net worth in at least two out of three fiscal years.
- There should be no ongoing case for the Industrial and Financial Reconstruction (BIFR), insolvency, or bankruptcy proceedings against the company or its promoters.
- The company should not have received any winding-up petition from NCLT/Court.
- No significant regulatory or disciplinary action should have been taken against the applicant company by any stock exchange or any agency in the last three years.
Here’s a table outlining the differences between SME IPO and Mainboard IPO:
This table provides a quick and clear distinction between the two IPO types.
Benefits of SME IPO
- Access to Capital: Enables SMEs to raise funds for growth, expansion, or debt repayment.
- Brand Visibility: Boosts the company’s visibility and credibility in the market.
- Investor Base Expansion: Attracts retail and institutional investors.
- Liquidity for Stakeholders: Provides an exit route for promoters or early investors.
How SME IPO Works
- Preparation:
- The company hires experts (merchant bankers, auditors) and prepares financials.
- Drafts a prospectus explaining the business, risks, and use of funds.
- Approval:
- Submits the prospectus to SEBI and the SME exchange (NSE Emerge or BSE SME) for approval.
- Marketing:
- Promotes the IPO through roadshows and advertisements to attract investors.
- IPO Launch:
- The IPO is opened for public subscription for 3–5 days.
- Investors apply to buy shares (minimum application size is typically ₹1 lakh or more).
- Share Allocation:
- Shares are allotted to investors, and the company ensures it meets the minimum subscription.
- Listing:
- The shares are listed on the SME exchange, allowing trading.
- Post-Listing Compliance:
- The company files regular reports and maintains governance standards.
GIFT CITY
GIFT City (Gujarat International Finance Tec-City) is a planned financial hub and special economic zone (SEZ) located in the state of Gujarat, India. It is designed to be a global financial and technology services center, catering to the needs of both domestic and international businesses. GIFT City is positioned as a modern, world-class city that aims to provide a conducive environment for businesses and financial institutions, with a focus on economic growth and infrastructure development. GIFT City also hosts multiple International Financial Service Centres (IFSC) that are approved and regulated by the government.
Permissible Industries are:
- Aircraft Leasing
- Banking
- Bullion Exchange
- Capital Markets
- Finance Company
- FinTech
- Foreign University
- Fund Management
- Global In-house Centres
- Insurance
- Payment Services
- Ship Leasing
- Ancillary Services
- BATF Services (Book-keeping, Accounting, Taxation and Financial crime compliance)