Mainboard IPO vs SME IPO: What Investors Should Know

Initial Public Offerings (IPOs) are major milestones in a company’s growth journey. For investors, understanding the difference between a Mainboard IPO vs SME IPO is crucial before committing capital. In this article, we’ll explore what each type means, their pros and cons, and how Finowings can help you navigate them.

What Is a Mainboard IPO?

A Mainboard IPO refers to when a well-established company lists its shares on the main boards of leading stock exchanges—such as NSE (National Stock Exchange) or BSE (Bombay Stock Exchange). These companies must satisfy stringent eligibility criteria set by SEBI (Securities and Exchange Board of India), such as minimum post-issue paid-up capital, profitability, net worth, and often having a strong track record.

Key features of a Mainboard IPO include:

• Regulatory rigor: Strict compliance requirements, frequent disclosures, and higher transparency.
  
  

• Broader investor base: Institutional investors, QIBs (Qualified Institutional Buyers), high net worth individuals (HNIs), and retail investors can participate.
  
  

• Liquidity: Trades happen in smaller lot sizes (even one share), offering greater flexibility.
  
  

• Lower risk: Because of mature business models, established financials, and better governance, risk tends to be lower.

What Is an SME IPO?

An SME IPO is designed for Small and Medium Enterprises that wish to raise capital by listing on dedicated SME platforms (for example, NSE Emerge or BSE SME). These are generally younger companies, less capitalized, with lower visibility, but with strong growth ambitions.

Characteristics of SME IPOs include:

• Easier listing norms: The eligibility criteria are less stringent compared to mainboard IPOs—lower thresholds for paid-up capital, profitability track record, etc.
  
  

• Larger lot sizes: Investors often have to apply for larger minimum lots, which means higher entry cost per investor.
  
  

• Lower liquidity and higher volatility: Since SME IPOs often have fewer buyers and smaller trading volumes, share prices may fluctuate more.
  
  

• Potential for big gains (and losses): If the business performs well, returns can be substantial. But risk is proportionally higher.
  
  

Mainboard IPO vs SME IPO: Key Differences

Let’s compare them side by side:

Considerations for Investors via Finowings

At Finowings, we believe that weighing Mainboard IPO vs SME IPO is essential to building a balanced portfolio. While SME IPOs may look tempting for their high growth potential, they require careful due diligence: study the business model, financials, management track record, and post-issue plans.

Here are some tips:

• Check subscription levels: How many times is the IPO oversubscribed in both Mainboard and SME categories? This indicates demand.
  
  

• Look at grey market premium (GMP) carefully: It can show pre-listing sentiment but is not always reliable, especially for SME IPOs.
  
  

• Understand allotment status: In mainboard IPOs, retail investors often have better chances of getting allotment; in SME IPOs, due to the larger lot sizes, allotments can be trickier.
  
  

• Factor in liquidity risk: Even after listing, SME IPOs might have fewer trades, which can make it harder to exit quickly.
  
  

Conclusion

Deciding between a Mainboard IPO vs SME IPO comes down to your risk tolerance, investment horizon, and the level of comfort with uncertainty. Mainboard IPOs offer more stability and lower risk, while SME IPOs offer higher growth potential if you can tolerate more volatility.

Finowings aims to provide you with tools, insights, and clarity—helping you make informed choices between Mainboard IPOs and SME IPOs, and ultimately, build a more resilient investment journey.