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An IPO (Initial Public Offering) is a first-time share sale offer by a company to the public to raise funds for growth. There are two types of IPOs, Main Board IPOs and SME IPOs. The main difference between the two is based on issue size as main board IPOs have bigger issue sizes than IPOs by small and medium-sized corporations. There are other differences also relevant to paid-up capital, minimum number of allottees, IPO prospectus vetting, underwriting, minimum application size, and market making. Continue reading to know what are the key differences between the main board IPO and SME IPO.
Companies with a minimum post-issue paid-up capital of Rs 10 crore that go public by issuing shares are called Main Board IPO or regular IPO. Such companies’ securities are listed on the BSE and NSE exchanges.
Mainline or mainstream companies are bigger in size so the size of the IPO issue by them is also huge.
SME IPO means an initial public offering or first-time share sale offer by a small and medium company. To issue a SME IPO, the post-issue paid-up capital shall not exceed Rs 25 crore. In India, there are two SME platforms; BSE SME and NSE SME (NSE Emerge) for listing SME shares.
| Basis of difference | Main Board IPO | SME IPO |
|---|---|---|
| Issue eligibility norms | SEBI has prescribed stringent and complex issue eligibility norms and guidelines for mainboard IPOs. | SME IPOs have relaxed eligibility norms, comprising certain conditions. |
| Post-issue paid-up capital | Companies proposing to list on the BSE and NSE exchanges must have a post-issue paid-up capital at the face value of Rs 10 crore atleast. | After the issue, the SME company must have a minimum post-issue paid-up capital of Rs 1 crore, and it should not go beyond Rs 25 crore. |
| Listing Exchange | Main board IPOs are listed on the BSE and NSE exchanges. | SME IPO shares are listed on either BSE SME or NSE Emerge exchange. |
| Number of allottees | Regular IPO must have at least 1,000 subscribers or allottees. | The minimum number of allottees in a SME IPO is only 50. |
| Minimum application or trading lot size | Mainboard IPOs generally have a minimum application value or a trading lot of Rs. 10,000-Rs 15,000. | The minimum application size in a SME IPO is very high at Rs 100,000 and above. |
| IPO underwriting | Underwriting is non-mandatory for the IPOs subject to 50% allocation to Qualified Institutional Bidders (QIBs). | The SME IPO must be 100% underwritten, and 15% underwriting should be from the merchant banker's account. |
| IPO offer documents | The IPO offer document, Draft Red Herring Prospectus (DRHP) is filled to SEBI for vetting. | DRHP and Prospectus are observed and reviewed by the stock exchange itself. SEBI observation is not required. |
| IPO Timeframe | Regular IPO takes nearly 6 months or more to make a public offer. | It takes 3 to 4 months to issue a SME IPO to the public. |
| Market making | Mainboard IPOs do not require post-issue market making. | Market making is mandatory for a SME IPO for liquidity. |
| Reporting | The IPO issuing entity has to audit its quarterly financial statements. | SME companies have to audit their half-yearly financial statements. |
Evidencing the differences between the mainboard and SME IPO, it can be said that launching SME IPO is the best route for SME companies who are planning to expand their business in the near future. It drives the following benefits to the issuer company:
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IPO Vetting is the process of thoroughly inspecting the IPO documents (DRHP and RHP), listing applications, and other documents. The IPO vetting department of the exchange listing division is responsible to check the truth and reliability of all the documents submitted by the company.
An issuer, who has listed its shares on the SME platform at BSE or NSE must submit audited financial reports on a half-yearly basis. Unlike it, main board companies have to submit audited results every quarter.
No, a small and medium-sized company going public does not have to verify its DRHP and RHP by SEBI as these documents are only verified by the stock exchange.
