What is IPO
IPO stands for Initial Public Offering. It is a process in which a privately held company becomes a publicly-traded company by offering its shares to the public for the first time. A private company with a handful of shareholders goes public by trading its shares and shares ownership. Through IPO, the company's name is listed on the stock exchange.
What is SME IPO
The IPO of Small and Medium Enterprises or SME is similar to the usual IPO . As the name suggests, small and medium-sized companies raise capital through this by selling shares to the public.
Small and medium-sized companies receive funds from private investors through IPO when they cannot get the necessary funding personaly. After the IPO, SME stocks can be traded on the stock exchange. Public investors who want to become shareholders of small and medium-sized companies can buy these shares.
Requirements for companies to issue SME IPO
Must be incorporated under the Companies Act, 1956
Must have a face value of up to ₹25 crore
Must have tangible assets of ₹1.5 crore
SMEs formed by converting partnership/proprietorship/LLP firms should have a track record of at least three years
SME should have a website.
The promoters of the company should not change for at least one year after filing of IPO.
SME should agree to trade in demat securities.
SME should enter into an agreement with depositories.
How to apply for SME IPO?
1) Open a demat account: The first step is to open a demat account with a broker of your choice to holding securities in digital form. There are various apps available for this
2) IPO announcements: It is importnat to keep a close eye on upcoming IPOs through various channels like newspapers, the company’s official website, announcements on BSE SME or NSE SME exchanges, etc. The IPO announcement will mention the opening and closing dates, price band, and lot size. Investors will receive notifications for NSE SME and BSE SME IPOs on their demat account app.
3) Apply for the IPO: Once the IPO is available, there are several ways to apply. One of the most common ways is to apply online through a web trading platform or a stock trading app. Investors provide precise details like the number of lots they wish to apply for, the price they are willing to pay, etc. To apply for an IPO, investors need to have a UPI ID linked to their bank account. IPO applications are submitted through the ASBA process, which means the application amount will be blocked in your bank account until the allotment process is completed.
4) Submit bid and make payment for IPO: Bidders can submit the application form to their broker before the IPO closing date. This can be done online through the broker’s platform. Bidders can submit bids at the cut-off price on the closing date. Bidders can also bid within the price range. Bidders should ensure that there are sufficient funds in the bank account linked to the demat account.
5) Check allotment status and refund amount: Bidders can check the allotment status on the exchange’s website or the registrar once the IPO is completed. If the shares are allotted, they will be credited to their demat account, if not allotted, the bid amount will be refunded to their bank account.
