October 08, 2025SME IPOs have become a powerful fundraising route in India, giving small and medium enterprises access to equity markets. Strong investor appetite, oversubscriptions and government support are making SME IPO a key factor for USD 5 trillion economy vision.
Raising money is one of the key aspects and the biggest challenge for any business. Large companies often have many resources and choices such as bank loans, private equity or issuing share to the public through an Initial Public Offering (IPO). But for smaller businesses especially the MSME sector, raising funds and access to capital have always been more difficult.
SMEs are the fastest growing sector of the Indian economy contributing to areas like employment, exports and innovation. But with limited resources and history of the company, they face hurdles in accessing traditional source of funding. With the rise of SME IPOs, there is a shift to more accessible funds. The strong investor response and the growing number of SME listings in the last few years suggest that this is no longer a niche route but a fast-growing trend.
Over the last few years, India has seen remarkable growth in the capital markets. On the mainboard, 76 companies launched IPOs in FY24, raising large amounts of money from the market. The momentum continued in FY25, with 80 mainboard IPOs taking place. Where the world faced global uncertainties, the investor appetite for new listings remained strong.
On the other hand, in FY24, 197 SMEs tapped the public markets to raise funds and in FY 25 another 122 companies followed the same path. The number of SME listings has exceeded those on mainboard, reflecting how smaller companies are increasingly turning to capital markets for their growth and how SME IPOs have become one of the most active segments of India’s equity market.
The rationale behind the success of SME IPO is supportive regulations, improved investor awareness and their strong performance post-listing. SME IPOs have offered a chance to investors to participate in the growth journey of emerging businesses.
For most small and medium enterprises, one of the key factors on which growth depends is access to money. Traditionally, these businesses relied on bank loans, personal savings or private investors. While these options are useful, they come with their own limits such as collateral for loans and private funding being not easy to secure.
An IPO on SME platform has given these companies a new route to get access to funding which can be eventually used for expansion, technology upgrades, marketing, working capital or any other. Beyond the money, it brings other advantages as well:
Visibility and credibility: A listed company gains recognition among customers, suppliers and lenders.
Better governance: Getting listed on stock exchange requires a lot of compliances eventually building investor confidence.
Liquidity for shareholders: Existing promoters and early investors have the option to sell their stakes in a regulated market.
SME IPOs help businesses position themselves for long term growth and stability.
While both SME IPOs and Mainboard IPOs serve the same purpose of helping the companies raise equity capital but the distinction lies at different stages, eligibility, compliance requirement and the visibility the companies gain post listing.
Parameter |
SME IPO |
Mainboard IPO |
Post-Issue Capital |
Up to ?25 crores |
Above ?25 crores |
Stock Exchange Segment |
SME Platforms (BSE SME, NSE Emerge) |
Main Exchange Boards (BSE, NSE) |
Regulatory Framework |
Relaxed compliance and disclosure norms designed for smaller firms |
Stringent compliance, governance, and disclosure norms |
Financial Track Record |
Shorter operational/financial history acceptable |
Strong financial performance and operational history required |
IPO Process |
Faster, simpler, and relatively cost-effective |
Lengthy, more complex, and expensive due diligence & documentation |
Investor Base |
Institutional investors, HNIs, and select retail investors |
Wide investor participation including retail, domestic, and foreign institutions |
Trading & Liquidity |
Limited trading volumes, lower analyst coverage, relatively illiquid |
Higher liquidity, broader coverage by analysts, and more active trading |
Growth Trajectory |
Option to migrate to mainboard once criteria are met |
Already positioned on the mainboard with access to deeper capital markets |
Perception & Branding |
Emerging businesses gaining visibility and credibility |
Established companies with stronger brand recognition and market presence |
Raising capital through an SME IPO is a structured and formal process, designed to make it accessible for smaller companies with investor protection. While SME IPO is comparatively simpler than a mainboard IPO but is still requires carefully planning and compliance with SEBI regulations.
Before initiating the process, a company must ensure that it meets the criteria set by SEBI and the stock exchange such as minimum net worth, post-issue capital limits and track record requirements.
Key intermediaries such as a merchant banker, auditors, legal advisors and registrars need to be appointed by the company. The merchant banker plays an important and central role guiding the company through documentation, regulatory approvals and the overall IPO process.
A Draft Prospectus is a document which offers detailed information about the company’s business, financials, risks and purpose of the IPO. This document is created to be submitted to the stock exchange and SEBI for review.
The draft prospectus is reviewed by SEBI and the exchange to ensure compliance with disclosure norms and investor protection guidelines. The regulatory bodies may issue comments which must be addressed by the company before final approval.
Once approved, merchant banker appointed by the company launches the IPO campaign. The main purpose of the campaign is to attract investors to subscribe to share and the issue is often marketed to institutional investors, high net worth individuals and retail participants.
After the subscription, shares are allotted to investors based on SEBI’s guidelines. The company is then officially listed on the SME platform of the stock exchange, enabling trading of its shares.
After getting listed companies must comply with post listing obligations such as reporting requirements, maintaining transparency in operations and regularly updating shareholders about performance and key developments.
Over the past two years, SME IPO has witnessed an extraordinary surge in investor interest. Many issues have been oversubscribed because of the high interest shown from institutional and retail investors. However, the motivation and oversubscription don’t guarantee success the real outcome depends on company’s fundamentals and governance.
In FY24 and FY25, several SME IPOs received subscription levels which were multiple times of the issue size.
The major reason for the motivation reflected by investors is the perception of quick listing gains, smaller issue sizes and growth potential of emerging businesses.
SME IPOs have delivered impressive listing day gains, some studies revealed that in FY25 on an average 12% gain was delivered by SME IPOs.
However, the long-term performance has been mixed. While some SME companies have created significant shareholder value, others have struggled with liquidity, governance or growth challenges post listing.
Investor enthusiasm and motivation have been one of the prominent reasons in fuelling the SME IPO boom. While the strong demand and oversubscription have been the reason for short term gains, but the real results are reflected on how the companies perform in medium to long term.
SME IPOs have become an integral part of India’s capital markets, but the main question is whether the current momentum can translate to sustainable growth. But the future of SMEs depends on well balance between opportunities and caution.
SMEs contribute nearly 30% of India’s GDP and 45% of exports. With further access to capital through IPO these businesses can scale, innovate and compete globally.
SME IPOs will further play an important role in job creation, regional development and supporting India’s broader growth ambitions.
With technology driven platforms dominating the space, SME IPO participation by retail investors is easier.
Simplified application processes and digital KYC are increasing the investor base.
As SEBI tighten the norms, the focus is shifting from quantity of listings to quality of companies entering the market.
With proper regulations in place, SMEs with solid business models and governance will get favoured.
As the SME IPO market grows in India they are increasingly compared to markets like AIM (UK) or NASDAQ’s small cap segment.
As the ecosystem matures, Indian SME markets become more attractive for global investors seeking growth exposure.
SMEs must strengthen governance, adopt transparent reporting practices and build scalable business models.
Investors ultimate focus should be on evaluating long term fundamentals rather on short term gains.
Regulators should continue to refine and improve the working of markets to ensure balance between accessibility with accountability, making sure that only credible companies tap public markets.
At ILO Consulting, we help businesses grow by guiding them through the IPO process and raising capital.
IPO Readiness: Check business fundamentals, governance and compliance before listing.
SME IPO Advisory: Provide step by step support from eligibility to documentation, approvals and market launch.
Capital Structuring: Advising on equity and hybrid options to raise funds responsibly.
Governance and Compliance: Strengthen reporting, transparency and ongoing disclosure.
Post IPO Support: Help improve liquidity, market visibility and investor relations for long term performance.
With our experience and local expertise, we help SMEs make their IPOs a real growth milestone.
Thank you for your interest. Write to us with your enquiries, questions or request a meeting with an expert to discuss your potential project. Our team will review and revert back shortly.
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