What is SME IPO & How to Apply for SME? | Espresso

What is an SME IPO and How to Apply for an SME IPO?

India’s growth story is incomplete without small and medium enterprises (SMEs) SME IPO. Despite SMEs' crucial role, they have to struggle for funds daily. Solving this, SME IPO offers promising investment opportunities for investors and is becoming increasingly popular due to its potential for growth and expansion.

Published on 11 July 2023

This blog aims to comprehensively understand SME IPO and guide potential investors in applying for them.

What is an SME IPO?

SME IPO refers to the process by which small and medium-sized companies offer their shares to the public for the first time to raise funds for business. Companies can raise the fund for business expansion, debt repayment, etc. Unlike regular IPOs of large companies, SME IPO is designed explicitly for smaller entities seeking to access the capital market. These IPOs provide an opportunity for investors to participate in the growth story of promising SMEs, and in return, SMEs gain access to a broader base of capital.

SME IPO Criteria

Before diving into the application process, let's understand the SME IPO criteria a company must meet to launch an SME IPO. The key criteria include

Track Record

The company must have a profitable track record for at least three years. This criterion ensures that the company has sound management with stable financial performance and is well-positioned to meet the publicly traded entity's obligations.

Net Worth

The minimum net worth of the company should be above a specified threshold, usually set by the stock exchange where the SME intends to list.


The company's post-issue paid-up capital (including the promoter's contribution) should not exceed a certain limit typically set by the exchange.

Promoters' Contribution

Promoters must hold a minimum percentage of the company's post-issue capital, ensuring their commitment to the business's success even after going public.

SME IPO Minimum Investment

SME IPO minimum investment depends on the company's offer price per share. Investors must purchase a minimum quantity of securities, which generally vary from one IPO to another. The minimum investment amount is around rupees 1,00,000, making it an attractive option for retail investors to participate in IPOs and potentially benefit from capital appreciation in the future.

How to Apply for an SME IPO?

Let's understand the step-by-step process of investing in an SME IPO.

Step 1: Choose a Reliable Stockbroker

To apply for an SME IPO, you'll need to do so through a registered stockbroker. Choose a reliable and trustworthy stockbroker with a good track record of handling IPO applications. The stockbroker must be registered with the stock exchanges and the Securities and Exchange Board of India (SEBI).

Step 2: Open a Demat Account

Open a Demat account if you don’t have one. A Demat account is essential for holding and trading securities in electronic form. Submit the required documents and complete the KYC to open your Demat account.

Step 3: Funding Your Trading Account

Before applying for an SME IPO, ensure you have sufficient funds in your trading account. The application amount will be blocked in your account until the IPO allotment process is completed.

Step 4: Check IPO Details

Monitor the stock exchange's website or financial newspapers for SME IPO announcements. Once the SME IPO you are interested in opens for subscription, check the prospectus (offer document) to understand the company's business, financials, and other relevant details.

Step 5: Fill out the IPO Application Form

Obtain the IPO application form from your stockbroker or download it from their online portal. Fill in the necessary details accurately, such as your name, PAN (Permanent Account Number), Demat account details, bid price, and the number of shares you want to apply for.

Step 6: Submit the Application

After completing the application form, submit it to your stockbroker before the IPO subscription period ends. You can apply for an SME IPO online or offline, depending on your broker's facilities.

Step 7: Application Payment

You can make payments through Internet banking or Unified Payments Interface (UPI) for online applications. Submit a check or demand draft along with the application form for offline applications.

Step 8: IPO Allotment

The company reviews the applications once the IPO subscription period closes and allocates shares based on demand. If oversubscribed, shares will be allocated pro-rata, and the refund will be credited to your account.

Step 9: Listing and Trading

After the allotment, the shares will be credited to your Demat account. The SME IPO shares are generally listed on the stock exchange within a few days after the allotment. You can start trading the allotted shares on the stock exchange.

Final Words!

SME IPO presents an exciting opportunity for small and medium-sized companies seeking capital and investors looking for growth prospects. Understanding the eligibility criteria, minimum investment, and the application process is crucial for investors to make informed decisions. By following the step-by-step guide on how to apply for an SME IPO, investors can participate in these offerings and potentially benefit from the growth of promising SMEs. Before investing, it is advised to get expert advice and select the right security that matches your financial goal and risk appetite. Happy investing!


Chandresh Khona
Team Espresso

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