There are two kinds of routes that Indian firms can take to enter the capital markets: the Mainboard IPO and the SME IPO. Both routes function as means of obtaining money from the general public, but each route targets totally different kinds of firms and follows its own set of rules and regulations.
For investors who are seeking to diversify their investments or businessmen looking to take their firm to the stock markets, it is important to understand the distinctions between Mainboard IPO and SME IPO. This blog post will cover all aspects related to the Mainboard IPO and the SME IPO.
What is a Mainboard IPO?
A Mainboard IPO is an initial public offering by a large, well-established company that lists its shares on the main trading platform of stock exchanges like the BSE (Bombay Stock Exchange) or NSE (National Stock Exchange). These IPOs are typically launched by companies with substantial revenue, a proven track record, and significant market presence.
Think of household names like Zomato, LIC, Nykaa, and Paytm — all of these went public through Mainboard IPOs.
What is an SME IPO?
An SME IPO (Small and Medium Enterprise IPO) is designed specifically for smaller companies that may not meet the stringent requirements of a Mainboard listing. These companies list their shares on dedicated SME platforms — the BSE SME or NSE Emerge (NSE SME).
SME IPOs serve as a stepping stone for growing companies that want to access public capital markets without the heavy regulatory burden of a Mainboard listing. Over time, successful SME-listed companies can migrate to the Mainboard.
Key Differences Between Mainboard IPO and SME IPO
1. Paid-Up Capital Requirement
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Post-issue paid-up capital | ₹10 crore or more | Less than ₹25 crore |
Mainboard IPOs require a minimum post-issue paid-up capital of ₹10 crore, which is significantly higher. SME IPOs cater to companies with a smaller capital base, with post-issue paid-up capital ranging between ₹1 crore and ₹25 crore.
2. Issue Size
- Mainboard IPO: Typically involves issue sizes of ₹10 crore and above, often running into hundreds or thousands of crores.
- SME IPO: The issue size is usually less than ₹25 crore, though some recent SME IPOs have pushed this boundary.
This difference reflects the scale at which these companies operate and the amount of capital they seek to raise.
3. Minimum Lot Size and Investment Amount
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Minimum lot size | Varies (usually ₹13,000–₹15,000) | Higher (typically ₹1,00,000–₹1,50,000) |
One of the most notable differences is the minimum investment amount. For Mainboard IPOs, the minimum application amount is approximately ₹13,000 to ₹15,000 for retail investors. In contrast, SME IPOs require a minimum investment of around ₹1,00,000 to ₹1,50,000, making the entry barrier significantly higher for individual investors.
This higher lot size in SME IPOs is a deliberate regulatory choice to ensure that only informed investors with a higher risk appetite participate.
4. Listing Platform
- Mainboard IPO: Companies list on the main board of BSE and/or NSE.
- SME IPO: Companies list on dedicated SME platforms — BSE SME or NSE Emerge.
The SME platforms have relaxed listing and compliance requirements compared to the main board.
5. Underwriting Requirements
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Underwriting | Not mandatory (partially underwritten in most cases) | 100% underwriting is mandatory, with the merchant banker underwriting at least 15% |
This is a critical safety net for SME IPOs. Since smaller companies carry higher risk, the mandatory 100% underwriting ensures that even if the IPO is not fully subscribed, the merchant banker guarantees the purchase of unsold shares.
6. Track Record and Eligibility Criteria
Mainboard IPO:
- The company should have a minimum track record of 3 years of operations.
- Must have net tangible assets of at least ₹3 crore in each of the preceding three years.
- Must have an average pre-tax operating profit of ₹15 crore during any three of the preceding five years.
- Alternatively, companies can follow the book-building route with relaxed profitability norms if they meet other criteria.
SME IPO:
- The company should have a track record of at least 3 years.
- Net worth should be positive.
- The eligibility criteria are more relaxed compared to Mainboard IPOs, allowing younger and smaller companies to participate.
7. SEBI Approval Process
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| DRHP review | Reviewed and approved by SEBI | Reviewed by the respective stock exchange (BSE/NSE) |
For Mainboard IPOs, the company must file a Draft Red Herring Prospectus (DRHP) with SEBI, which then reviews and provides observations. This process can take 30 days or more.
For SME IPOs, the DRHP is reviewed by the stock exchange itself, which speeds up the process significantly. SEBI does not directly scrutinize SME IPO documents, though it retains overall regulatory oversight.
8. Reporting and Compliance Requirements
Mainboard IPO:
- Companies must file quarterly financial results with the stock exchanges.
- Stringent disclosure and corporate governance requirements under SEBI LODR (Listing Obligations and Disclosure Requirements).
- Must have a minimum number of independent directors, audit committees, and other governance structures.
SME IPO:
- Companies are required to file half-yearly (semi-annual) financial results instead of quarterly results.
- Relatively relaxed corporate governance and compliance norms.
- Lower regulatory burden, allowing companies to focus more on business growth.
9. Number of Allottees
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Minimum allottees | At least 1,000 allottees | At least 50 allottees |
Mainboard IPOs require a wider distribution of shares among the public, ensuring broader market participation. SME IPOs, given their smaller size, require a minimum of only 50 allottees.
10. Migration to Mainboard
SME-listed companies can migrate to the Mainboard once they meet the eligibility criteria, including:
- Paid-up capital exceeding ₹10 crore.
- A track record of profitability and compliance.
- Shareholder approval through a special resolution.
This migration path makes SME IPOs an attractive first step for growing companies with long-term ambitions.
11. Market Making
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Market making | Not mandatory | Mandatory for a minimum of 3 years |
SME IPOs require compulsory market making, where a designated market maker provides buy and sell quotes to ensure liquidity in the stock. Since SME stocks tend to have lower trading volumes, market making helps prevent extreme price swings and ensures that investors can buy or sell shares when needed.
12. Risk Profile
Mainboard IPO:
- Generally considered lower risk due to the company’s established track record, larger size, and stringent regulatory oversight.
- More analyst coverage and institutional interest.
- Better liquidity post-listing.
SME IPO:
- Considered higher risk due to the smaller size of the company, limited track record, and lower regulatory scrutiny.
- Less analyst coverage and research availability.
- Lower liquidity, making it harder to exit positions.
- However, the return potential can be significantly higher if the company performs well.
Quick Summary Table
| Parameter | Mainboard IPO | SME IPO |
|---|---|---|
| Post-issue paid-up capital | ₹10 crore+ | Up to ₹25 crore |
| Issue size | ₹10 crore+ | Less than ₹25 crore |
| Minimum application amount | ~₹15,000 | ~₹1,00,000+ |
| Listing platform | BSE/NSE Main Board | BSE SME / NSE Emerge |
| DRHP reviewed by | SEBI | Stock Exchange |
| Underwriting | Not mandatory | 100% mandatory |
| Financial reporting | Quarterly | Half-yearly |
| Minimum allottees | 1,000 | 50 |
| Market making | Not mandatory | Mandatory (3 years) |
| Risk level | Moderate | Higher |
| Return potential | Moderate to high | High (with higher risk) |
Which One Should You Invest In?
The choice between a Mainboard IPO and an SME IPO depends on your risk appetite, investment horizon, and financial goals.
Choose Mainboard IPOs if:
- You prefer stability and lower risk.
- You want to invest in well-established companies with proven business models.
- You value liquidity and the ability to easily buy or sell shares.
- You rely on analyst research and institutional validation before making investment decisions.
Choose SME IPOs if:
- You have a higher risk tolerance and are comfortable with volatility.
- You’re looking for multibagger potential in early-stage or high-growth companies.
- You have done thorough due diligence and understand the company’s business, promoters, and financials.
- You’re willing to hold for the long term and can handle periods of low liquidity.
Recent Trends in the SME IPO Market
The SME IPO segment has witnessed remarkable growth in recent years, particularly in 2023 and 2024. Several factors have contributed to this boom:
- Record number of SME IPOs hitting the market, with many receiving massive oversubscription.
- Stellar listing gains — some SME IPOs have delivered 100%+ listing gains, attracting retail investor attention.
- Growing awareness among small businesses about the benefits of going public.
- Government initiatives like Startup India and MSME support schemes encouraging formalization.
However, this boom has also raised concerns about overvaluation, speculative frenzy, and the quality of some listings. SEBI has taken note and is considering tighter regulations for the SME segment.
The Bottom Line
Mainboard IPOs and SME IPOs are equally important within the Indian capital market environment. Mainboard IPOs serve as a means through which big and well-known firms can raise substantial amounts of money, whereas SME IPOs allow small companies access to capital in a democratic way.
From an investor’s perspective, the most important thing to do is always research. One should not be tempted by marketing tactics or listing day returns alone. Investors must study the financial performance of the firm, its business model, the integrity of its promoters, and the valuation before investing in any IPO – either Mainboard IPO or SME IPO.
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Disclaimer: This blog post is for informational and educational purposes only. It does not constitute financial advice. Please consult a qualified financial advisor before making any investment decisions.
