SME IPO vs Mainline IPO: Key Differences and Which Is Right for Your Business

Understand the essential differences between SME and Mainline IPOs, including size, regulations, and investor eligibility, to determine the best fit for your company.

Introduction

Taking a company public through an Initial Public Offering (IPO) is a significant milestone that can propel a business to new heights. However, the path to going public varies considerably based on the size and maturity of the company. Two primary avenues exist for businesses aiming to enter the public markets: SME IPOs and Mainline IPOs. Understanding the key differences between these two options is crucial for determining which route aligns best with your company’s goals and capabilities.

What is an IPO?

An IPO represents the very first offering of a company’s shares to the public with the intent to raise capital for growth and expansion. IPOs are categorized based on company type and issue size, leading to distinct paths for SMEs and larger enterprises.

Defining SME IPO and Mainline IPO

SME IPO

An SME IPO is tailored for small and medium-sized enterprises seeking to offer their shares to the public through specific platforms like NSE Emerge and BSE SME. These offerings are designed to help SMEs raise funds more efficiently, overcoming the challenges posed by traditional funding methods.

Mainline IPO

A Mainline IPO targets larger companies with significant capital requirements. These IPOs are listed on prominent exchanges such as the NSE and BSE, catering to businesses with a substantial market presence and financial stability.

Key Differences Between SME IPOs and Mainline IPOs

1. Issue Size

• Mainline IPO: Typically involves larger issue sizes, catering to well-established companies with extensive capital needs.
• SME IPO: Focuses on smaller issue sizes, making it more accessible for emerging businesses with limited capital requirements.

2. Regulatory Requirements

• Mainline IPO:
• Paid-Up Capital: Requires a minimum of ₹10 crores post-issue.
• IPO Timeframe: Generally takes 6 months or more to complete.
• Underwriting: Not mandatory if 50% of shares are distributed to Qualified Institutional Buyers (QIBs).

• Listing Exchanges: Listed on both NSE and BSE.

• SME IPO:

• Paid-Up Capital: Post-issue capital must not exceed ₹25 crores.
• IPO Timeframe: Typically completed within 3 to 4 months.
• Underwriting: 100% underwriting is required, with 15% from the merchant banker’s account.
• Listing Exchanges: Listed on either BSE SME or NSE Emerge platforms.

3. Eligibility Criteria

• Mainline IPO:
• Net Worth: At least ₹1 crore in each of the preceding 3 years.
• Operational History: Strong financial performance with stringent profitability norms.

• Market Capitalization: Minimum of ₹25 crores.

• SME IPO:

• Net Worth: Minimum of ₹1 crore for the two preceding fiscal years.
• Operational History: At least 3 years of operational history with positive operating profits in 2 out of the last 3 years.
• Leverage Ratio: Should not exceed 3:1.

4. Investor Eligibility and Market Making

• Mainline IPO:
• Investor Base: Broader, including retail, institutional, and high-net-worth investors.

• Market Making: Not required post-issue, focusing on liquidity through diverse investor participation.

• SME IPO:

• Investor Base: More concentrated, often requiring a minimum of 50 allottees.
• Market Making: Mandatory to maintain liquidity, ensuring the trading stability of the shares.

Determining the Right IPO Path for Your Business

Choosing between an SME IPO and a Mainline IPO hinges on several factors:

• Company Size and Capital Needs: Larger companies with extensive funding requirements are better suited for Mainline IPOs, while smaller enterprises may find SME IPOs more manageable.

• Regulatory Compliance: SMEs looking for a less stringent regulatory framework might prefer SME IPOs, which offer more flexible eligibility norms.

• Timeframe: If a quicker path to going public is essential, SME IPOs typically have shorter timelines compared to Mainline IPOs.

• Investor Strategy: Consider the target investor base and liquidity needs. Mainline IPOs cater to a broader investor spectrum, whereas SME IPOs focus on maintaining liquidity through mandatory market-making.

How TriC Global Can Assist Your IPO Journey

Navigating the complexities of an IPO requires expertise and strategic guidance. TriC Global specializes in providing IPO as a Service, tailored specifically for SMEs and startups. With over 20 years of experience in capital markets, TriC Global offers:

• Expert Guidance: From initial preparation to post-listing compliance, ensuring a seamless IPO process.
• Tailored Strategies: Customized approaches for IPO readiness and regulatory adherence.
• Global Partnership Network: Expanding your market reach through international collaborations.
• Comprehensive Support: Including legal compliance, financial structuring, and investor engagement.

By leveraging TriC Global’s services, your business can effectively navigate the IPO landscape, whether you opt for an SME IPO or a Mainline IPO.

Conclusion

Deciding between an SME IPO and a Mainline IPO is a pivotal choice that can significantly impact your company’s growth trajectory. Understanding the fundamental differences in issue size, regulatory requirements, eligibility criteria, and investor dynamics is essential for making an informed decision. By aligning your IPO strategy with your business objectives and leveraging expert support from firms like TriC Global, you can successfully take your company to the public markets.

Ready to take the next step? Visit TriC Global to discover how we can help your business achieve a successful IPO.