What Is an SME IPO and How Is It Different from a Mainboard IPO?

If you follow IPO news, you will see many SME IPOs every month. They often look similar to big IPOs, but the rules, the size and the risks are quite different. In this article, you will learn what an SME IPO is, how it is different from a mainboard IPO, and what the latest SEBI rules say.

In short: An SME IPO is an initial public offering by a small or medium enterprise that lists on a special exchange platform, NSE Emerge or BSE SME, instead of the main board. SME IPOs are smaller, and after SEBI's 2025 changes, an individual must apply for at least two lots, so the minimum bid is more than Rs 2 lakh. A mainboard IPO is for larger companies and lets you start with about Rs 10,000 to Rs 15,000. SME shares also trade in lots, often have low trading volume and can be riskier.

The Monetary Policy Committee is the group that decides India's key interest rate. It was set up in 2016 under the Reserve Bank of India Act, 1934, after the Act was amended to bring in inflation targeting.

Before 2016, the RBI Governor alone decided the repo rate. Now the decision is made by a vote of the committee.

An IPO (initial public offering) is when a company sells its shares to the public for the first time. After the IPO, the shares are listed on a stock exchange, and anyone can buy or sell them there.

In India, there are two routes to an IPO:

• Mainboard IPO: For larger companies. The shares list on the main platform of the NSE or BSE. (Here is what an IPO is and how to apply.)

• SME IPO: For small and medium enterprises. The shares list on a separate SME platform.

An SME IPO is an IPO by a small or medium enterprise. The shares list on:

• NSE Emerge, the SME platform of the NSE, or

• BSE SME, the SME platform of the BSE.

These platforms help smaller businesses raise money from the public without meeting the bigger requirements of the main board.

Under SEBI's ICDR (Issue of Capital and Disclosure Requirements) Regulations, a company can use the SME route if its paid-up capital after the issue is up to Rs 25 crore.

In 2025, SEBI made the rules for SME IPOs stricter to protect small investors. The main changes, as per the SEBI (ICDR) amendments notified in March 2025, are:

• Profit test: The company must have an operating profit (EBITDA) of at least Rs 1 crore in any two of the last three financial years.

• Limit on selling by existing owners: The offer for sale (the part where existing shareholders sell their shares) is capped at 20 percent of the issue size. Each selling shareholder can sell at most 20 percent of their own pre-issue holding.

• Bigger minimum application: An individual investor must apply for at least two lots, and the minimum application must be above Rs 2 lakh.

• New investor category: The old "retail individual investor" category in SME IPOs has been replaced by an "individual investor" category. NSE applied the new bidding process to all SME IPOs opening on or after 1 July 2025.

The aim is to keep very small investors away from a riskier segment and to make sure only businesses with some track record can list.

Note: A few of these points need a little more explanation.

For a mainboard IPO, the company files its draft offer document with SEBI, and SEBI gives its observations. For an SME IPO, the offer document is filed with the stock exchange (NSE Emerge or BSE SME), which reviews it.

This is the biggest difference for a small investor.

Here is an example with made-up numbers. An SME IPO has a price of Rs 100 per share and a lot size of 1,200 shares. One lot costs Rs 1.2 lakh. Since an individual must apply for at least two lots, the minimum bid is Rs 2.4 lakh.

In a mainboard IPO, the minimum bid is usually one lot worth about Rs 10,000 to Rs 15,000.

After listing, mainboard shares trade one share at a time. You can buy just one share if you want.

SME shares trade in fixed lots. If the lot size is 1,200 shares, you can only trade in multiples of 1,200. This makes it harder to sell a small part of your holding.

In an SME IPO, a market maker must be appointed for at least three years after listing. A market maker is a broker who agrees to quote buy and sell prices for the share, so that there is some trading. Even so, trading volume in many SME shares remains low.

An SME company can move to the main board later if it meets the main board's rules on size, profit and track record. This is called migration.

SME IPOs can be riskier than mainboard IPOs. Here is why:

• Small and young businesses: Many SME companies are small, with a short track record. Their business can be hit hard by one bad year.

• Low liquidity: Fewer people trade SME shares, which creates liquidity risk. You may not be able to sell when you want, at the price you want.

• Big price swings: With low volumes, prices can rise or fall sharply.

• Less public information: Small companies have less analyst coverage and media attention, so you need to read the offer document yourself.

• High subscription is not a promise: A heavily subscribed SME IPO can still list below its issue price or fall after listing. Listing gains are never guaranteed.

SEBI has also flagged concerns in the past about price manipulation and misleading promotion in some SME shares. This is one reason behind the 2025 changes.

In October 2026, SEBI released a consultation paper proposing more changes to SME IPO rules. As reported, the ideas include:

• lowering the minimum application to about Rs 1 lakh,

• allowing SME shares to be traded one share at a time instead of in lots,

• a tougher profit test, with an average operating profit of Rs 3 crore a year over three years.

These are only proposals. SEBI has invited public comments, reportedly until 4 November 2026. The current rules continue until SEBI notifies any change.

If you are looking at any SME IPO, these steps can help you understand it better:

• Read the offer document (RHP). Check the business, the financials, the promoters, the use of money raised and the risk factors.

• Check the profit track record. See how revenue and profit have changed over the last three years.

• Check the offer for sale. See how much of the money goes to the company and how much goes to existing owners.

• Look at the debt. High debt in a small company can be a warning sign.

• Understand the lot size. Know how much money you need and how easy it may be to sell later.

• Ignore unofficial tips and grey market talk. Grey market premium (GMP) is unofficial and unregulated, and it does not decide the listing price.

These checks help you understand the business. They cannot tell you the listing price.

An SME IPO is an IPO by a small or medium enterprise that lists on NSE Emerge or BSE SME. After SEBI's 2025 rules, an individual must apply for at least two lots, so the minimum bid is above Rs 2 lakh, and the company must meet a profit test. SME shares trade in lots and often have low liquidity, which makes them riskier than mainboard shares. SEBI has proposed fresh changes in October 2026, but they are not final yet. Read the offer document carefully and decide based on your own goals and risk.

Ans. An SME IPO is an initial public offering by a small or medium enterprise. Its shares list on a special SME platform, NSE Emerge or BSE SME, instead of the main board. SME companies have a post-issue paid-up capital of up to Rs 25 crore.

Ans. After SEBI's 2025 changes, an individual investor must apply for at least two lots in an SME IPO. This means the minimum application is more than Rs 2 lakh. SEBI has proposed lowering this to about Rs 1 lakh, but that is not final.

Ans. An SME IPO is for smaller companies and lists on an SME platform, while a mainboard IPO lists on the main NSE and BSE board. SME IPOs need a bigger minimum application, trade in lots and often have lower liquidity. Mainboard IPOs start at about Rs 10,000 to Rs 15,000 and trade as single shares.

Ans. SME IPOs are generally riskier. The companies are smaller, trading volumes are often low, prices can swing sharply and there is less public information. A high subscription does not guarantee listing gains.

Ans. Yes. An SME company can migrate to the main board of the NSE or BSE if it meets the main board's rules on size, profit and track record. Until then, its shares trade on the SME platform.

Facts and rules verified as of 30 October 2026.

• SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Chapter IX (SME issues), the 2025 amendments, and the SEBI board memo "Review of SME framework under SEBI (ICDR) Regulations, 2018" (sebi.gov.in).

• NSE circular IPO68604 on the revised SME IPO bidding process: minimum bid of 2 lots, above Rs 2 lakh, for issues opening on or after 1 July 2025.

• SEBI consultation paper on SME IPO rules (October 2026), as reported by Outlook Money and Neurasix.

• NSE Emerge and BSE SME platform pages.

• The lot-size example uses made-up numbers only to explain the method.