Large organizations have multiple ways of raising capital to fund their business activities, such as bank loans, global investors, and stock exchanges. But the road is not as easy for Small and Medium Enterprises (SMEs), which face challenges in getting the required capital due to lack of a broad investor base, absence of required documents to quantify their financial performance, unfamiliarity or apprehension in raising money through stock exchange, and many more. Considering the enormous potential of the SME industry in creating jobs (employing around 120 million people) and contribution to India’s GDP (estimated to make up 33% of the national GDP by 2028), it is necessary to bridge the gap between the global investing community and the SME sector. In this blog, we will understand SME IPO, and the complete process of how to apply for SME IPO on BSE SME & NSE Emerge stock exchanges. 

What is an SME IPO?

SME IPO provides an alternative route for unlisted small and medium enterprises to raise capital from the stock exchange. It is a win-win situation for both SMEs and investors. On one hand, SMEs can list their securities on the stock exchange and sell their shares to potential investors, thereby securing the required capital to fund their strategic business operations. On the other hand, investors can identify SMEs with high growth potential and lower cost of capital, giving them a chance to make greater than anticipated returns in the long run.

How to Apply for SME IPO  

The SME IPO listing process is quite elaborate and can stretch for more than 3 months based on multiple factors like the company’s financials and existing market conditions.  

Here is a step-by-step guide on SME IPO listing process:  

 1. The IPO Planning Stage

  • Create an IPO team including managers, company promoters, and external advisors. 
  • Hire an experienced investment bank to guide you through the entire IPO journey. 
  • Check whether you are eligible for an SME IPO.
  • Before launching your IPO, assess your company’s current valuation and estimate the capital required to fund your project. 

2. Eligibility Criteria for IPO

  • Verify that the company meets all the listing requirements including profitability, minimum paid-up capital (money raised by selling a portion of legally authorized capital), and track record (established operating history).  
  • Ensure the company is registered under the Companies Act 1956/2013. In the case of a partnership or an LLP, the net worth (total assets minus the liabilities) should be at least Rs. 1 crore for the preceding two financial years. 
  • Collect important documents like minutes of meetings, articles of association, and internal approvals from shareholders and the board of directors. 

3. Conduct Due Diligence and Appoint a merchant banker  

  • Hire a SEBI-registered merchant banker to walk you through the entire IPO process. 
  • The merchant banker will prepare IPO offer documents, file the prospectus with the stock exchanges, and determine the issue price for the IPO. 
  • The merchant banker will conduct due diligence to ensure all documents are accurate. 
  • They will also help you with underwriting services and use their connections to attract investors.

4. Submit Draft Red Herring Prospectus (DRHP) 

  • The merchant banker will prepare the DRHP and file it with the stock exchange.  
  • This DRHP will contain critical information about the company including the reason for issuing the IPO, the company’s financial performance over the years, valuations, risks, etc. 
  • As investors make investment decisions based on DRHP it is important to ensure there is no discrepancy. 

5. Get in-principal DRHP Approval 

  • The stock exchange reviews the DRHP document and conducts site visits. 
  • The Listing Advisory Committee carries out necessary investigations by calling the company’s promoters. 
  • Based on this exercise, the exchange either grants in-principal approval or points out the discrepancies. 

6. File Prospectus with the Registrar of Companies (RoC)

  • After the approval of the DRHP, the merchant banker submits the RHP which includes information like the issue price, opening and closing dates of the IPO issue, tentative IPO timetable, etc. 
  • Then the merchant banker determines the IPO issue price after evaluating the company’s valuation. 
  • After the RHP is approved, the merchant banker publishes the DRHP and RHP on its website. 
  • Finally, the merchant banker advertises the IPO by conducting roadshows and meeting with potential investors. 

7. Launch of SME IPO 

  • The SME IPO is launched on a predetermined date allowing investors to subscribe for the IPO. 
  • Potential investors can subscribe to the minimum lot size (smallest order an investor can place) prior to the closing date. 
  • Investors can purchase shares of Rs. 1,00,000 or more.

8. Allotment of SME IPO Shares

  • The Register and Transfer Agent (RTA) processes all IPO applications and transfers the allocated shares to the investors after the closing date. 
  • The registrar allocates shares based on different categories like retail and non-retail investors. 
  • The registrar prepares a Basis of Allotment (BoA) based on SEBI guidelines. 
  • The registrar publishes the BoA in a widely read newspaper after the allotment is finalized. It contains the total number of applications that each investor category has received, the total number of shares that have been applied in each investor category, and the rate of subscription per investor category.

9. List the SME IPO

  • A small and medium enterprise is listed on the stock exchange after it publishes a listing circular containing a distinct symbol, ISIN, security code, and date of admission. 
  • Investors can start trading shares from the day of listing. 
  • Investors cannot buy or sell a single SME share. They can only trade it in lots.


SME IPO allows small and medium enterprises to raise money by selling their shares to the public. This fundraising route is becoming increasingly popular for SMEs as it allows them to bypass strict criteria laid down by institutional investors. Additionally, the relaxation of norms by SEBI in the listing process is another reason why SME IPOs are gaining momentum. This alternative way of accumulating funds will provide a significant impetus to the Indian SME industry, which will enable them to generate more jobs and increase their contribution to the national GDP.

Why Choose InCorp Advisory?

The SME IPO listing process is complex and requires concerted efforts of several stakeholders. At InCorp, we have an expert team of consultants who have years of expertise helping SMEs list their securities on the stock exchange. To learn in detail about how to apply for SME IPO, you can reach out to us at (+91) 77380 66622 or email us at

Frequently Asked Questions on SEM IPO