SME IPO Eligibility Criteria
SME IPO, or an Initial Public Offering by a Small and Medium Enterprise, is the process by which a privately-held SME raises capital by issuing and selling shares of stock to the public for the first time. This allows the company to access a larger pool of capital, which can be used for expansion, debt repayment, or other corporate purposes. By going public, the company also gains increased visibility and credibility, which can help it to attract new customers, partners, and investors.
The SME IPO process typically involves preparing financial records and ensuring that the company meets regulatory requirements, appointing intermediaries such as a merchant banker and a legal advisor, conducting due diligence, drafting a prospectus, filing with regulatory authorities, marketing the IPO, allotting shares, and finally listing the shares on a stock exchange for public trading.
Small and medium enterprises (SMEs) in India looking to go public through an initial public offering (IPO) must meet the following eligibility criteria set by the Securities and Exchange Board of India (SEBI):
SME IPO Eligibility Criteria
1. Company size: The company should have a minimum net worth of INR 3 crore (approximately USD 420,000) and a minimum track record of 3 years of profitable operations.
2. Revenue: The company should have a minimum average annual revenue of INR 10 crore (approximately USD 1.4 million) in the preceding 3 financial years.
3. Shareholding pattern: The promoter and promoter group's shareholding should not be less than 51% and public shareholding should be at least 25%.
4. Minimum number of public shareholders: The company should have a minimum of 200 public shareholders, each holding a minimum of INR 20,000 (approximately USD 2,800) worth of shares.
5. Listing: The company should be listed on a recognized stock exchange and comply with the listing regulations of the exchange.
SME IPO Listing Process
The process of listing an SME (Small and Medium Enterprises) for an Initial Public Offering (IPO) typically involves the following steps:
1. Preparation: This involves preparing the necessary financial records and ensuring that the company meets the regulatory requirements for listing.
2. Appointing intermediaries: SMEs typically appoint a Merchant Banker, a Legal Advisor, and a Registrar to the Issue for IPO listing.
3. Due Diligence: The intermediaries will conduct a thorough due diligence process on the company to ensure that its financials and operations are in order and that it is ready for public listing.
4. Drafting the Prospectus: A prospectus is a document that provides information about the company and the terms of the IPO to potential investors.
5. Filing with regulatory authorities: The intermediaries will file the draft prospectus and other necessary documents with the relevant regulatory authorities, such as the Securities and Exchange Board of India (SEBI), for approval.
6. Marketing the IPO: Once the prospectus is approved, the intermediaries will start marketing the IPO to potential investors.
7. Allotment of shares: After the IPO closes, the shares are allotted to investors based on the terms of the prospectus.
8. Listing: The company's shares will be listed on a stock exchange, allowing them to be traded publicly.
Also Read- What is SME IPO
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