What is an SME IPO?

An SME IPO (Small and Medium Enterprise Initial Public Offering) is a process through which small and medium-sized companies raise funds from the public by issuing shares for the first time.

1. Instead of being listed directly on the main stock exchanges, these companies list their shares on special platforms designed for SMEs, such as:

• BSE SME
• NSE Emerge

2. The eligibility norms for SME IPOs are more relaxed compared to mainboard IPOs, making it easier for growing businesses to access capital markets.

3. Through an SME IPO, investors can become shareholders of smaller companies that have high growth potential, but also higher risk.

Example:

If a small manufacturing company wants to expand its operations, it may launch an SME IPO to raise ₹20 crores. Instead of taking loans, it collects funds from investors, and in return, investors get shares that can be traded on the SME exchange.