SME IPO Process

Small and Medium Enterprises (SMEs) are essential contributors to India’s economic development, and SME Initial Public Offerings (IPOs) have become increasingly significant in recent times. An SME IPO involves raising capital by issuing shares to the public and getting listed on a stock exchange. Going public provides SMEs with various advantages, including access to capital markets, improved credibility, liquidity for current shareholders, and enhanced corporate governance.

The SME IPO process encompasses understanding the fundamentals, pre-IPO preparations, drafting the offer document, filing for approval, marketing the IPO, launching and subscription, and ultimately listing on the stock exchange. This intricate procedure necessitates meticulous planning, implementation, and compliance with regulatory standards established by the Securities and Exchange Board of India (SEBI).

  1. Understanding the Basics of SME IPO
  • An SME IPO represents a pivotal milestone in a company’s journey, marking the moment it opens its doors to public investment by offering shares for the first time. This process grants investors the opportunity to become stakeholders in the enterprise. However, this endeavor is not without its prerequisites. SEBI, the apex regulatory authority overseeing the securities market in India, has laid down specific eligibility criteria that SMEs must fulfill to embark on an IPO. These benchmarks include maintaining a minimum net worth, demonstrating positive cash flow generation, and establishing a proven track record of profitability and operational experience over a defined period.
  1. Pre-IPO Preparation
  •  Embarking on the IPO journey necessitates a thorough internal assessment and strategic planning exercise by SMEs. This involves evaluating the company’s financial health, identifying growth opportunities, and assessing its readiness for public scrutiny. If required, financial restructuring or audits may be undertaken to ensure compliance with regulatory requirements. Engaging experienced advisors, such as financial consultants, legal experts, and IPO consultants, is crucial during this stage, as they guide various aspects of the IPO process, including valuation, regulatory compliance, and documentation. 
  1. Drafting the Offer Document
  • The Draft Red Herring Prospectus (DRHP) is a vital component of the IPO process, containing comprehensive information about the company, such as its business overview, financial statements, risk factors, management details, and the proposed use of IPO proceeds. Merchant bankers, appointed by the company, play a pivotal role in drafting the DRHP, ensuring compliance with SEBI guidelines. They collaborate closely with the company’s management and other advisors to gather all necessary information and present it accurately, transparently, and in an investor-friendly manner.

SME IPO Process

  1. Filing and Approval
  • Once the DRHP is finalized, it is submitted to SEBI and the respective stock exchanges for review and approval. SEBI thoroughly examines the document to ensure it meets all regulatory requirements and that the provided information is accurate and complete. During this stage, SEBI may raise queries or seek clarifications from the company and its advisors, which must be promptly and satisfactorily addressed to obtain final approval. Upon approval, the DRHP is converted into the Red Herring Prospectus (RHP), which serves as the final offer document.
  1. Marketing the IPO
  • After obtaining regulatory approvals, the company embarks on a comprehensive marketing campaign to generate investor interest and build confidence in the IPO. This typically involves conducting roadshows, investor meetings, and various promotional activities. During this stage, the company, in conjunction with its merchant bankers, sets the price band for the IPO, taking into consideration factors such as market conditions, company valuation, and investor demand.
  1. IPO Launch and Subscription
  • With the marketing campaign in full swing, the company opens the IPO for public subscription, allowing investors to participate through various modes, including the fixed price issue or the book-building process. During the subscription period, the company and its advisors closely monitor the subscription levels, with the flexibility to extend the duration if necessary to ensure adequate participation and achieve the desired fundraising targets.
  1. Listing on the Stock Exchange

  • Upon the successful completion of the IPO subscription process, the company proceeds with the allotment of shares to investors based on predetermined criteria. Subsequently, the company’s shares are officially listed on the SME platform of the respective stock exchanges, such as the BSE SME or the NSE Emerge. Post-listing, the company is obligated to adhere to various disclosure and reporting requirements set forth by SEBI and the stock exchanges, ensuring transparency and safeguarding the interests of investors.


The SME IPO journey is an intricate and multidimensional endeavor that demands meticulous planning, seamless execution, and strict adherence to regulatory frameworks. A successful IPO can unlock transformative growth opportunities for SMEs, providing them with the necessary capital infusion and enhanced credibility to propel their operations forward and realize their strategic aspirations. At Inspirigence Advisors, we possess a deep understanding of the unique challenges and prospects that SMEs encounter while navigating the IPO process. Our team of experienced professionals offers comprehensive IPO consulting services, guiding SMEs through every phase of the journey, from pre-IPO preparation to post-listing compliance. If you are an SME contemplating an IPO, we encourage you to reach out to Inspirigence Advisors without hesitation. Our unparalleled expertise and personalized approach will enable you to navigate the complexities of the IPO process seamlessly, unlocking new growth horizons for your business.