Imagine you are out to buy vegetables and you have two choices to buy apples. First is a big supermarket like Reliance Smart or Big Bazaar where everything is packaged, checked for quality, and sold in small quantities. You can buy limited products only though it is a safer and easy option.
Second is a wholesale market or Mandi where you can get cheaper prices and also you may find great deals, but here you cannot buy limited products you must have to buy a whole sack of products here. Also the crowd here is different and you need to be an expert to pick the right sack.
In the stock market, Mainboard IPOs are like the supermarket and SME IPOs are like the wholesale market. Both are ways for companies to sell shares to the public. But the rules, the risks, and the money you need are completely different.
If you are thinking of investing, you must know the difference between ipo and SME ipo. Investing in the wrong one without knowledge can trap your money. In this blog, we will explain the difference between SME IPO vs mainboard IPO. We will also cover the new rules from 2025 and help you decide which one is right for you.
What is a Mainboard IPO?
The Mainboard is the game of big league in the stock market. When you listen to different news or hear people talking about the stock market on TV, they are usually talking about Mainboard companies. These are large, famous companies with a long history.
Key Features of Mainboard IPO
- Big Companies: These are large companies that are in the market and doing business for many years and usually make good profits.
- Strict Checking: Before any Mainboard IPO comes the Securities and Exchange Board of India (SEBI) crossverifies the company’s papers very strictly, as everything about their business needs to reach the public.
- Small Investment: In Mainboard IPOs investment can be started with a very small amount which is the best part for the small investors. The minimum amount to invest starts between Rs.14,000 to Rs.15,000.
- High Liquidity: Once the shares are listed on the stock exchange, you can buy or sell even one single share of the company. If you need money, you can sell your shares instantly as these shares are highly liquid.
Example: Companies like Zomato, LIC, or Reliance are on the Mainboard.
Read Also: From Private to Public: Decoding the IPO Journey
What is an SME IPO?
SME IPO stands for Small and Medium Enterprises. These are smaller companies, often young startups or family businesses that are growing at a fast pace. As they are small in size they cannot comply with strict and expensive rules of the Mainboard. So there is a special platform created for these SME companies by the stock exchange. This platform is NSE Emerge or BSE SME.
Key Features of SME IPO
- Small Companies: These companies are still in the growing phase. You can imagine these companies as a local factory, a small IT company, or a chain of restaurants.
- Less Strict Rules: These companies require lesser documents as compared to mainboard companies. The verification is mostly done by the Stock Exchange, not SEBI directly.
- Big Investment: Here minimum investment is not Rs.15,000, these SME companies have a very high minimum entry. With the new rules effective from July 2025, you need more than Rs.2 Lakhs to apply.
- Hard to Sell: One of the major problems here is the risk of selling these shares as you cannot trade 1 share, you need to trade in “Lots.”
Example: These are often smaller, unknown brands that operate in specific regions or industries. Generally they are not famous companies in the market.
“Lot Size” and “Liquidity” of Mainboard and SME IPOs
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Share Trading | Shares are individually traded | Shares are traded in fixed bundles called “Lots” |
| Liquidity | High liquidity | Very low liquidity |
| Risk | Low risk of capital getting stuck | High risk of capital getting stuck |
| Entry & Exit | Easy entry and exit | Difficult exit due to lot size and liquidity |
Difference Between Mainboard IPO and SME IPO
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Company Size | Large and established companies | Small and growing companies |
| Regulatory Authorities | SEBI is the regulatory authority | Stock Exchange regulates these companies |
| Minimum Investment | Rs.14,000 to Rs.15,000 | Above Rs.2,00,000 (2 lots) |
| Applied By | Anyone can apply in this (small & big investors) | Only big investors (HNIs) |
| Trading Unit | Can start trading from 1 Share onwards | 1 Lot (eg: 1,000 shares) |
| Ease of Selling | Very Easy due to high liquidity | Difficulty in selling due to low liquidity |
| Listing Timeline | Takes around 6 to 12 months | Takes 2 to 3 months |
New Rules for 2025
In the last few years, many people blindly invested in SME IPOs to make quick money. This was making the market a dangerous place, so SEBI introduced strict new rules that started in 2025 to keep small investors safe.
1. Minimum Amount Increased
Earlier, an investor can invest typically around Rs.1 Lakh in an SME IPO, but now, as per the new rules the minimum application size is 2 Lots. This means the minimum investment is now often above Rs.2 Lakhs. This effectively removes very small retail investors from this risky market.
2. No “Retail” Category
In Mainboard IPOs, there is a special quota for Retail investors. In SME IPOs, this category has been removed or renamed to “Individual Investors”. You are now competing with bigger players like HNI or non-institutional investors
3. Strict Monitoring
SEBI has asked stock exchanges to watch SME stocks closely. If a stock price jumps too high without any reason or the volatility spikes or abnormal trading patterns, they will put it under a “Surveillance Measure” (ASM or GSM). This restricts trading to protect investors from manipulation.
Read Also: Top 10 Most Highest Subscribed IPOs in India
Eligibility Criteria for Mainboard and SME IPOs
| Mainboard IPO | SME IPO |
|---|---|
| The company needs to have an operating profit track record of Rs.15 Crores in 3 out of the last 5 years. | Under new rules, the company must have an operating profit of at least Rs.1 Crore in 2 out of the last 3 years. |
| It should have assets (like land or machines) worth at least Rs.3 Crores. | The post issue capital must be less than Rs.25 Crores |
| The company’s paid-up capital must be at least Rs.10 Crores for eligiblility of Mainboard IPO | The company must be running for at least 3 years. |
Advantages of Mainboard and SME IPOs
Advantages of Mainboard IPO
- Safety: These companies are big and strictly regulated by authorities. There is less chance of the company conducting any fraudulent activities, delisting or sudden business failure.
- Transparency: You get detailed financial reports every 3 months of these companies making you aware about the company.
- Small Ticket: Investment can be started with a small amount of money.
Advantages of SME IPO
- High Growth: Small companies can grow at a very fast pace. A small company can double its size in just a year, which is not possible in big companies like Reliance, Tata Motors, etc.
- Multibagger Returns: If you pick the right SME stock, your money can grow 5 times or 10 times in just a few years.
- Early Entry: You select these companies when they are at the start of their growth phase. If they perform well these SME can be shifted to Mainboard later on. The migration improves visibility and liquidity of the share which can positively impact valuation.
Risks Included in Mainboard and SME IPOs
Risks in Mainboard IPO
- Slow Growth: Large companies are stable, but grow at a very slow pace and you might not see your money double quickly.
- Market Risk: If the whole market gets unstable and it starts to falls, these stocks will also fall.
Risks in SME IPO
- Liquidity Trap: You might not find a buyer for your “Lot” when you want to sell.
- Lack of Information: These companies are not tracked by big news channels. You might not get enough information or news about what is going wrong inside the company.
- Price Manipulation: Because the company is small, a few rich people can manipulate the stock price easily. They can pump the price up and then sell, leaving small investors with a loss.
Conclusion
If you are a new investor or have limited capital, you shall prefer Mainboard IPOs. stick to Mainboard IPOs. They are safer, easier to understand, and you can exit anytime.
If you are an experienced investor and have spare money to invest (more than Rs.2 Lakhs) then you can afford to risk and can look for some SME IPOs. They offer higher rewards but there is very high risk attached with them. It is just like hunting for treasure, you might find gold, or you might get lost.
You should always remember that return of capital is more important than return on capital, meaning you should first look for safety rather than returns.
| NO. | Check Out These Interesting Posts You Might Enjoy! |
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| 1 | What is Pre-IPO Investing? |
| 2 | What is the IPO Cycle – Meaning, Processes and Different Stages |
| 3 | What are the Different Types of IPO in India? |
| 4 | Why Invest in an IPO and its Benefits? |
| 5 | Best Apps for IPO Investment in India |
Frequently Asked Questions (FAQs)
Can investors buy a single share of an SME IPO?
Investors cannot buy or sell 1 share in an SME IPO. You have to trade in “Lots” and one unit can have 100, 500, or even 1,000 shares depending on the price.
Why is the minimum investment for SME IPO Rs.2 Lakhs now?
To keep the small and new investors away from high risk, SEBI has increased the limit. They want only investors who have high risk-taking capacity to enter this market.
Can an SME company move to the Mainboard?
If an SME company grows big and reaches a market value of over Rs.100 Crores (and meets other profit rules), it can migrate to the Mainboard.
What is a Market Maker in an SME IPO?
Since SME stocks are hard to sell, the company hires a broker called a “Market Maker.” Their job is to stay in the market and offer to buy or sell shares so that investors are not stuck.
Is it safe to invest in SME IPOs?
It is riskier than Mainboard IPOs, while many SMEs give great returns, some can lose value or get suspended.
