Types of IPOs: Mainboard vs SME
Understand the difference between Mainboard and SME IPOs, their eligibility, investor impact, and key features.
Mainboard vs SME Eligibility
Mainboard IPOs are for large, established companies with post-issue capital above ₹10 crore.
SME IPOs are for small and medium companies with post-issue capital between ₹1 crore and ₹25 crore.
BSE SME IPO Eligibility: SMEs must meet the following criteria set by the BSE SME platform for issuing SME IPO.
Eligibility requirements for BSE SME IPO include but are not limited to:
Eligibility Eligibility Requirement Net worth At least Rs 1 crore for 2 preceding full financial years Net Tangible Assets Rs 3 crores in the last preceding financial year Track record (operations) At least 3 years Operating profits Positive for 2 out of 3 latest financial years. Leverage ratio Not more than 3:1.
NSE SME IPO Eligibility: NSE Emerge platform lists the following eligibility criteria for a company to issue SME IPO:
- The company should have a track record (operations) of at least three years.
- The promoters should individually or jointly hold at least 20% of the share capital after the issue.
- One of the promoters should have at least three years of experience in the same industry.
- The company should have operating profit and positive net worth in at least 2 out of 3 fiscal years.
Check Points
Mainboard needs minimum 1000 shareholders; SME needs at least 50 shareholders. Mainboard follows stricter SEBI rules; SME has relaxed eligibility and compliance.
Lot and Minimum Investment Differences
Mainboard IPO minimum investment is around ₹10,000–₹15,000.
SME IPO minimum investment is higher, starting often at ₹2,00,000.
Example
Think of Mainboard IPOs as a large shopping mall accessible to many, SME IPOs like boutique stores with limited visitors.
Regulatory Updates and Implications
Mainboard IPO approvals come from SEBI; SME IPO approvals mostly from the stock exchanges.
Market making is mandatory in SME IPOs for 3 years to maintain liquidity, not mandatory for Mainboard.
Reporting: Mainboard companies report quarterly financials; SME companies report half-yearly.
Good Point
Investors in Mainboard IPOs get better investor protections due to tighter regulations.
Comparison Table
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Post-Issue Capital | ≥ ₹10 crore | ₹1 crore to ₹25 crore |
| Minimum Shareholders | ≥ 1000 | ≥ 50 |
| Regulatory Body | SEBI | Stock Exchanges (NSE/BSE SME) |
| Minimum Investment | ₹10,000 - ₹15,000 | ₹2,00,000 (higher entry barrier) |
| Reporting Frequency | Quarterly | Half-yearly |
| Market Making | Not mandatory | Mandatory for 3 years |
| Risk Level | Lower, more stability | Higher, more volatility |
Questions and Answers
Q: Can SME IPOs migrate to Mainboard later?
A: Yes, if they meet eligibility in size and compliance.
Q: Why is market making mandatory for SME IPOs?
A: To improve liquidity and price discovery in a smaller market.
Practice Questions
Which IPO type is better suited for risk-averse investors and why?
How does the reporting frequency differ between Mainboard and SME IPOs?
Till Now Learnings
Mainboard offers stability and broad access.
SME IPOs carry higher risk but can be growth engines.
Investment amounts and liquidity vary significantly.
References
Angel One Knowledge Center, 2023
SEBI ICDR Regulations, 2018
NSE and BSE SME Platforms