Context:
The small-and-medium enterprises stock market is fast being occupied by institutional investors as opposed to traditional, retail investors considered to be part of mainstream in the country with relatively much smaller quantum IPOs usually below Rs 50 crore.
Highlights:
- Institutional investors are currently entering the segment of IPOs for small and medium enterprises as opposed to individual investors.
- Institutional portion of SME IPOs neared almost 50%, as of December 2024, from the low single-digit shares in the past three years.
Small and Medium Enterprise Initial Public Offering (SME IPOs):
- SME IPO means Initial Public Offering publicly operated by privately owned small and medium companies to their shares to the public for the first time.
- Purpose
- The objectives of these SME IPOs are to raise funds for purposes such as working capital, repayment of debts, and other needs for business operation.
- Platforms
- Such IPOs are listed on dedicated platforms like BSE SME and NSE Emerge.
- Eligibility
- Eligible companies fulfill the eligibility. Minimum paid up capital of a company should be ₹3 crores and distribute profits in at least two out of the last three financial years to be eligible.
- Process
- This comprises appointing a merchant banker, conducting legal compliance and due diligence, draft prospectus filing, and marketing the IPO.
- Participation:
- This describes both retail and institutional investors participating in them, but, of late, institutional investors are coming to dominate SME IPOs.
