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Nine IPOs, including Leela Hotels and Aegis Vopak Terminals, are open for bidding this week; SME IPOs need more capital and are riskier, mainboard IPOs are relatively safer.
IPOs are categorised into two types — SME IPOs (Small and Medium Enterprises IPOs) and Mainboard IPOs.
SME IPOs Vs Mainboard IPOs: The primary market has again become active, after a hiatus of around 3-4 months due to market correction. This week, nine initial public offerings (IPOs), including both mainboard and SMEs, are set to see investor bidding. On Monday, two mainboard IPOs have already been opened for bidding — Leela Hotels IPO and Aegis Vopak Terminals IPO — which will be closed on Wednesday.
Among the SME IPOs, Unified Datat Tech is set to be closed on Monday at 5 pm. Four IPOs will open on Tuesday — Prostarm Info Systems IPO, Blue Water Logistics IPO, Astonea Labs IPO, and Nikita Papers IPO. Two more IPOs will be opened on Wednesday — Scoda Tubes IPO and Neptune Petrochemicals IPO.
What Is The Difference Between SME and Mainboard IPOs?
IPOs are categorised into two types — SME IPOs (Small and Medium Enterprises IPOs) and Mainboard IPOs. If you’re planning to invest in IPOs, understanding the key differences between the two is crucial.
What Is an SME IPO?
SME IPOs are public issues launched by small and medium-sized enterprises to raise funds. These are typically smaller companies with less capital, limited business history, and high growth potential.
In India, SME IPOs are listed on dedicated platforms such as:
- NSE Emerge (for companies listed on NSE)
- BSE SME Platform (for companies listed on BSE)
What Is a Mainboard IPO?
Mainboard IPOs are launched by large and well-established companies. These companies are listed on the main exchanges — NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) — and must meet stricter listing norms and financial requirements.
Mainboard IPOs often receive higher investor participation, including interest from mutual funds, institutional investors, and FIIs.
Key Differences Between SME IPOs and Mainboard IPOs
| Feature | SME IPO | Mainboard IPO |
|---|---|---|
| Eligibility | Net tangible assets ≥ Rs 1 crore, Net worth ≥ Rs 1 crore | Net tangible assets ≥ Rs 3 crore, Net worth ≥ Rs 3 crore |
| Track Record | At least 3 years | At least 3 years with profitability |
| Listing Platform | NSE Emerge, BSE SME | NSE, BSE (Mainboard) |
| Issue Size | Rs 10 crore to Rs 50 crore (typical) | Rs 100 crore and above |
| Lot Size | Large lot size (Rs 1-2 lakh minimum) | Rs 14,000 to Rs 15,000 approx. |
| Regulation | Relatively relaxed norms | Strict SEBI compliance & disclosures |
| Retail Participation | Lower due to high ticket size | Higher due to lower entry barriers |
| Underwriting | Mandatory | Optional |
| Market Maker | Mandatory for 3 years | Not required |
Who Should Invest in SME IPOs?
According to market experts, investors with a higher risk appetite and long-term perspective may consider SME IPOs. While they carry higher risk due to limited business history and liquidity, they also offer multi-bagger potential if the business scales successfully.
According to them, before investing in an SME IPO, always check:
- The company’s fundamentals
- Promoter track record
- Business scalability
- Valuation
“Investors must do a careful due diligence before applying for SME IPOs. Do not blindly follow GMP numbers doing round on the internet. Also, make sure the IPO has enough liquidity so that you can sell your shares easily after the listing,” said a market expert.
The SME IPO requires high capital to apply (around Rs 1-2 lakh, compared with around Rs 15,000 in the case of mainboard IPOs), which warrants even more careful due diligence, he added.
Who Should Invest in Mainboard IPOs?
Mainboard IPOs are more suitable for:
- Retail investors
- Institutional investors
- Conservative investors
These IPOs generally offer better transparency, liquidity, and regulatory oversight, making them a safer choice for most individuals.
Experts said these IPOs should be seen on a case-by-case basis. “Every company is difference, their fundamentals are different, their niches are different. Investors must do a due diligence before applying for any IPO,” said the expert.
SME IPOs vs Mainboard IPOs: Pros and Cons
Pros of SME IPOs:
- Early entry into high-potential companies
- Less market competition
- Attractive valuations (sometimes)
Cons of SME IPOs:
- Low liquidity
- Higher risk
- Limited public information
Pros of Mainboard IPOs:
- Strong regulatory checks
- Better liquidity post-listing
- Easier to buy/sell
Cons of Mainboard IPOs:
- Valuations can be high due to hype
- Difficult to get allotment in oversubscribed issues
Final Verdict: Which IPO Should You Choose?
The choice between SME IPO vs Mainboard IPO depends on your:
- Risk tolerance
- Investment goals
- Capital availability
If you’re a high-risk, high-reward investor, SME IPOs may appeal to you. However, if you prefer stable companies and better liquidity, Mainboard IPOs are a safer bet.
Always read the red herring prospectus (RHP) and consult a financial advisor before investing in any IPO, said the expert.
FAQs: SME IPOs vs Mainboard IPOs
Is it safe to invest in SME IPOs?
SME IPOs are riskier than Mainboard IPOs, but some have delivered strong returns. Do thorough research.
Can retail investors apply for SME IPOs?
Yes, but minimum investment is usually Rs 1–2 lakh due to larger lot sizes.
Is there a lock-in period for SME IPOs?
No lock-in for retail investors, but promoters and market makers may have lock-in obligations.
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