What It Means
An SME IPO is the public listing route for small and medium enterprises, run on NSE Emerge or BSE SME instead of the regular mainboard. It works the same basic way as any IPO, a company selling shares to the public for the first time, but under a lighter, exchange-vetted rulebook built for smaller companies rather than SEBI's full mainboard scrutiny.
How It Works
The minimum application is ₹2 lakh (two lots), well above a mainboard retail application, and shares are allotted through a Draw of Lots once a category is oversubscribed. Every SME IPO also requires a Market Maker, a broker under a three-year contract to keep quoting buy and sell prices, since these stocks often don't have enough natural buyers and sellers to trade smoothly on their own. Eligibility is tighter than it used to be too: an issuer needs real operating profit in 2 of the last 3 years, not just a positive net worth on paper. A company that outgrows the platform can later move over through Migration to Mainboard.