Difference Between IPO and SME IPO
A beginner-friendly, neutral breakdown of annual results work — covering key terms, what the Difference Between IPO and SME IPO
Reviewed by Team Research Desk
Last Updated: July 2026
Introduction
When a company wants to raise money from the public for the first time, it does so through an Initial Public Offering, commonly known as an IPO. Most beginners have heard of large, well-known companies going public. However, there is another category called SME IPO, which relates to small and medium enterprises raising funds through the stock market. While both processes allow a company to sell shares to the public, they differ in size, regulation, risk profile, and the kind of investors they typically attract. This blog breaks down these differences in a simple way so that anyone new to investing can understand the basics, and also answers some of the most commonly asked questions on this topic.
What is an IPO?
An IPO, or Initial Public Offering, is the process through which a privately held company offers its shares to the public for the first time. Once the IPO is complete, the company gets listed on the main board of a stock exchange, and its shares become available for trading. Companies going through a regular IPO are generally larger, with an established business history and higher financial thresholds to meet as part of regulatory requirements.
Before the shares are offered, the company files an offer document (often called a Draft Red Herring Prospectus, or DRHP) with the relevant market regulator. This document contains details about the company's business, financials, promoters, and the purpose for which funds are being raised. Once approved, the company announces a price band, opens the issue for a few days, and investors can bid within that band. After the bidding closes, shares are allotted based on demand, and the stock gets listed on the exchange.
What is an SME IPO?
An SME IPO follows a similar concept but is meant specifically for Small and Medium Enterprises. These companies are usually smaller in size and may not meet the stricter financial or operational criteria required for a mainboard listing. To support such businesses in raising capital, stock exchanges operate a separate SME platform with relatively simplified rules, while still maintaining regulatory oversight to protect investors.
SME IPOs generally follow a similar process to mainboard IPOs — filing an offer document, price discovery, subscription, allotment, and listing — but with some differences in eligibility norms, disclosure requirements, and post-listing obligations, such as a mandatory market maker for a specified period after listing. Some SME companies, after growing in scale and meeting mainboard eligibility norms, may later migrate from the SME platform to the main board of the exchange.
The IPO and SME IPO Process, Step by Step
While the exact process can vary, most public issues broadly follow these stages:
• Filing of the offer document with the relevant regulator, detailing the company's business and financials.
• Regulatory review and approval of the offer document.
• Announcement of the price band and the issue opening/closing dates.
• Subscription period during which investors can apply within the specified price band.
• Allotment of shares based on the level of subscription received in each investor category.
• Refund of money to investors who did not receive allotment, or partial allotment adjustments.
• Listing of shares on the stock exchange, after which trading begins.
Eligibility and Investor Categories
Both IPOs and SME IPOs typically reserve a portion of shares for different investor categories, such as retail individual investors, non-institutional investors (including high-net-worth individuals), and qualified institutional buyers. The exact reservation percentages and rules can differ between a mainboard issue and an SME issue, and are governed by applicable regulatory guidelines. In SME IPOs, since the overall issue size is usually smaller, the number of shares available in each category is also proportionately smaller, which can sometimes lead to higher subscription multiples.
Key Differences
The table below summarizes some of the common differences between a mainboard IPO and an SME IPO. These are general, illustrative points meant to help beginners understand the broad distinctions; actual requirements can vary and are governed by applicable exchange and regulatory rules.
Note: Figures and thresholds mentioned are illustrative and simplified for educational understanding. Always refer to official exchange and regulatory guidelines for exact, current requirements.
Illustrative Comparison: Investment Amounts
One of the most noticeable differences for a beginner is the minimum amount typically needed to apply. SME IPOs generally require a higher minimum investment per lot compared to mainboard IPOs, mainly because the minimum lot size in SME issues tends to be structured differently. The chart below shows an illustrative, generic comparison for understanding purposes only.
Who Typically Invests in Each?
Mainboard IPOs tend to attract a broad mix of investors, including retail individual investors, high-net-worth individuals, and institutional investors such as mutual funds and insurance companies. This is partly because mainboard companies are usually larger, better known, and offer more liquidity.
SME IPOs, on the other hand, often attract a narrower base of investors. Because the minimum investment amount is usually higher and the companies are smaller in scale, SME IPOs may see more participation from high-net-worth individuals and investors who are comfortable with the higher risk and lower liquidity that can come with smaller companies.
Risk and Liquidity Considerations
Every investment carries some degree of risk, and IPOs are no exception. A few general points beginners often consider include:
• Company size and track record: Mainboard companies typically have a longer operating history, while SME companies may be relatively newer or smaller in scale.
• Liquidity: Shares of mainboard companies are generally traded more frequently, while SME shares may see comparatively lower trading volumes.
• Disclosure norms: Mainboard IPOs involve more extensive disclosure requirements, while SME IPOs follow a simplified but still regulated disclosure framework.
• Market maker requirement: SME listings often require a designated market maker for a specified period to support trading activity.
Frequently Asked Questions (FAQs)
Here are some of the most commonly asked questions on this topic, answered in simple terms for beginners.
Ques 1: What does IPO stand for?
Ans : IPO stands for Initial Public Offering. It refers to the process by which a private company offers its shares to the public for the first time and gets listed on a stock exchange.
Ques 2 : What is the main difference between an IPO and an SME IPO?
Ans : The main difference lies in company size and listing platform. A regular IPO is generally for larger, more established companies listed on the main board, while an SME IPO is meant for smaller enterprises listed on a dedicated SME platform with simplified norms.
Ques 3 : Is investing in an SME IPO safe for beginners?
Ans : SME IPOs are regulated, but they generally carry higher risk compared to mainboard IPOs due to smaller company size, lower liquidity, and higher investment amounts per lot. Beginners are encouraged to understand these risks and do thorough research before considering any investment.
Ques 4 : What is the minimum investment required for an SME IPO?
Ans : SME IPOs typically require a higher minimum lot value compared to mainboard IPOs. The exact amount varies from issue to issue and is decided as per applicable exchange norms, so it is important to check the specific offer document for each issue.
Ques 5 : Can retail investors apply for an SME IPO?
Ans : Yes, retail individual investors can generally apply for SME IPOs, subject to the minimum lot size and category-wise reservation rules applicable to that particular issue.
Ques 6 : How is share allotment decided in an IPO or SME IPO?
Ans : If an issue is oversubscribed, allotment is usually done through a lottery or proportionate basis within each investor category, as per regulatory guidelines. If an issue is undersubscribed, investors may receive the full number of shares applied for, subject to applicable rules.
Ques 7 : What is a market maker in an SME IPO?
Ans : A market maker is an intermediary appointed to provide buy and sell quotes for a stock, helping maintain some level of trading activity. In SME IPOs, appointing a market maker for a specified period after listing is often a mandatory requirement, which is not always the case for mainboard IPOs.
Ques 8 : Can an SME company later move to the main board?
Ans : Yes, an SME company that grows in scale and meets the eligibility criteria for a mainboard listing may apply to migrate from the SME platform to the main board of the exchange, subject to regulatory approval.
Ques 9 : Is there a lock-in period for SME IPO shares?
Ans : Promoters and certain categories of shareholders are usually subject to a lock-in period after an SME IPO listing, meaning they cannot sell their shares for a specified duration. Lock-in rules can differ between mainboard and SME issues, so it is useful to check the specific offer document.
Ques 10 : How can I check the allotment status of an IPO or SME IPO?
Ans : Allotment status can typically be checked through the registrar handling the issue, or through the stock exchange's website, usually by entering application details such as the application number or PAN, once allotment is finalized.
Ques 11 : What are unlisted shares or pre-IPO shares, and how are they related to IPOs?
Ans : Unlisted shares refer to shares of a company that are not yet listed on a stock exchange. Some investors explore buying such shares before a company's IPO, often referred to as pre-IPO investing, as a way to potentially gain exposure to a company ahead of its public listing. This route generally involves different risks compared to investing in a listed IPO, including limited liquidity, wider price uncertainty, less standardized disclosure, and the fact that a company's plans to go public are not guaranteed and can change. This is shared here purely as general educational information about how the concept works, and not as a recommendation or suggestion to buy unlisted or pre-IPO shares.
Ques 12 : What should a beginner keep in mind before applying to any IPO or SME IPO?
Ans : Some general points beginners often look into include reading the offer document carefully, understanding the company's business and financials, checking the price band and lot size, being aware of the applicable risks, and considering their own financial goals and risk appetite. This is general educational information and not a recommendation for any specific action.
Disclaimer :
This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.