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All You Need to Know About SME IPO

All You Need to Know About SME IPO

What is an SME IPO?

Similar to your regular Initial Public Offering (IPO), SME IPOs are IPOs issued by Small and Medium Enterprises. SMEs that obtain their funding from private investors issue IPOs when private financing can no longer meet their financial requirements. After the IPO ends, SME stocks are traded on the stock exchange. Public investors can become stakeholders in the SME by buying their shares.

SME IPO – Eligibility criteria

  • The SME should be incorporated under the Companies Act, 1956.
  • The SME should have a face value (post issue paid-up capital) of up to ₹25 Crore.
  • The SME's net tangible assets should be worth ₹1.5 Crore.
  • The SME must have a track record of a minimum of three years if it was formed by converting partnership/proprietorship/LLP firms.
  • The SME should have a website.
  • The company's promoters should not change for at least a year after filing the IPO.
  • The SME should agree to trade in Demat securities.
  • The SME should enter into a contract with the depositories.

SME listing process – How it works

Let us understand the SME listing process. SMEs must hire the right professionals to tackle the mountain of paperwork and other compliance formalities for issuing an IPO. Here are the steps private SMEs must follow if they intend to go public.

  • Appoint an underwriter
  • Prepare the DRHP
  • Submit the DRHP
  • Advertise the IPO and announce the launch date
  • Launch the IPO and allot the shares

After the IPO is officially launched in the primary market and the company allots the shares to the investors, the company becomes a public company. At this point, other investors can buy its shares in the secondary market.

We, at Capflow Consulting LLP, can help unlock the true value of your SME business and have initiated the Smart SME series to educate, encourage, and empower SMEs and Corporates with practical solutions and actionable insights to equip them with financial literacy to help them improve their creditworthiness and raise optimum finance in the right way to help them grow. Let’s raise better, to grow better.