What are SME IPOs?
SME IPOs (Initial Public Offering) are the best way to get public funding and list on the stock exchange for small or medium-sized enterprises (SMEs). For Normal Ipos, requirements are high in comparison to SME IPOs. The smaller companies with lower market capitalization and less operating history may proceed with SME IPOs and get funds for their growth and expansion plans.
Higher Profitability
Investing in SME IPOs can be highly rewarding as they offer ultimately higher returns. SMEs launch IPOs in the early stages of their growth and expansion. These small companies can grow faster than large enterprises because they are at their initial stage. SMEs have unique business models and generate higher margins compared to larger competitors.
Investors perceive SME IPOs as undervalued because they offer limited public information and less historical data about that company.
Normal Investors can’t invest in startup companies because of limited fund availability. SME IPOs are the best way to invest in startups for normal investors. These IPOs are also less impacted by market conditions and higher chances of growth.
Difference Between IPO and SME IPO
| SME IPOs | Regular IPOs |
|---|---|
| Target Small companies | Target larger companies |
| disclosure and compliance rules are simple | disclosure and compliance rules are complex |
| Regulatory requirements are less | Regulatory requirements are complex |
| Liquidity is less in market | liquidity is high in market |
| Aimed at retail investors | Aimed at institutional investors. |
| High Volatile and high risk | Less Volatile and less risk in compare to SME IPOs |
How to Apply in SME IPOs?
Here’s how you can apply for an SME IPO:
- First, you have a Demat Account (With any broker such as Zerodha, Upstox, Angel Broking, etc.)
- Access the IPO application through your broker’s online platform or mobile app.
- Select the “SME IPO” section inside the IPO Section.
- Enter the number of lots for which you want to apply.
- Double-check all the details and confirm your application.
- Now you need to make payment through your bank account(via UPI).
- After the IPO closes, the allotment results are announced. If you win the lottery, you will receive shares; otherwise, your amount will be unblocked.