How to Apply for SME IPOs

When it comes to SME IPOs, you’re not buying “just another IPO.” SME IPOs list on NSE Emerge or BSE SME, use market makers to support trading, and generally call for higher application amounts with lower post-listing liquidity. They can deliver meaningful upside when the underlying business is strong and pricing is reasonable, but they also carry higher execution risk and limited exit options if chosen poorly. Read on to understand eligibility, key rules, and step-by-step guidance on how to apply SME IPOs.

Eligibility and the new application rules

You need a PAN, a demat account, and a bank/broker that supports Application Supported by Blocked Amount (ASBA) or UPI blocking for IPOs. Many SME issues now require a minimum of two lots with a total ticket size typically above ₹2 lakh, and you must enter a price within the band (no “cut-off” option). Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs) can apply for more than two lots. Always confirm the exact lot size and bidding rules in the Red Herring Prospectus (RHP).

Every SME IPO reserves a portion for a market maker who must provide two-way quotes post-listing to keep trading orderly. This support improves tradability but does not erase liquidity risk; exits can still be delayed or subject to price slippage during volatile sessions

How to apply in SME IPOs: Two methods

• ASBA via your bank Log in to net banking, open the IPO/ASBA section, pick the SME IPO, enter your DP ID/Client ID, choose at least two lots, set a bid price within the band, and submit. Funds are blocked, not debited until allotment.

• UPI through your broker: If you’re wondering how to apply for an SME IPO through a broker, the process is simple. On the main IPO page, select the SME IPO, enter your lot size and bid price, confirm, and then approve the UPI mandate in your linked UPI app. The flow is quick and convenient, making it one of the easiest ways to participate.

How the bidding and allotment work

SME IPOs may be fixed-price or book-built. You enter a price (no cut-off), quantity in lot multiples, and DP details. After the issue closes, the registrar finalises the basis of allotment, blocks only the allotted amount, and releases the rest. Listing now follows a compressed T+3 timeline—allotment finalisation, refunds/unblocking, demat credit, and trading wrap up quickly.

Key dates you must track

• RHP filed: Read the purpose of funds, peer comps, related-party transactions, promoter background, and working capital cycles.
  
• Issue opens: Place your bid early. Approve the UPI mandate the same day if using UPI.
  
• Issue closes: Last chance to correct bid size/price. Remember, most SME issues require a minimum of two lots and do not permit a cut-off option.
  
• Basis of allotment (typically T+1): Check status on the registrar’s site.
  
• Funds unblocked/shares credited (typically T+2): Verify bank and demat.
  
• Listing day (typically T+3) Decide your plan—partial exit, full hold, or stop-loss. Opening moves can be sharp either way.
  

Common mistakes that get investors into trouble

• Bidding at cut-off in SME IPOs: Most SME issues do not permit cut-off bids; such applications are rejected.
  
• Applying for only one lot: Invalid when the minimum application size is two lots.
  
• Missing the UPI mandate: The application lapses automatically if the mandate is not approved.
  
• Over-relying on the market maker: Their role is to support orderly trading, not to guarantee liquidity.
  
• Ignoring the price band: A valid bid must specify a price within the band; avoid last-minute rumours.
  

Step-by-step checklist

1. Demat mapped to your PAN; KYC up to date.
   
2. Bank supports ASBA/UPI for IPOs and has sufficient free limits for a ₹2+ lakh block.
   
3. Read the RHP—use of funds, risks, customer/vendor concentration, market-maker terms.
   
4. Decide price and at least two lots; avoid last-hour edits.
   
5. If using UPI, accept the mandate immediately and verify the block.
   
6. On allotment day, reconcile. If not allotted, ensure funds are unblocked; if allotted, confirm demat credit before listing.
   
7. Listing plan ready (targets, stops, or hold rationale). No on-the-fly decisions.
   

What to expect after listing

Day-one prints can be extreme because free float is small and market-maker quotes are tight but finite. Circuit filters, pre-open discovery, and dealer flow can create gaps. If you intend to exit, use limit orders and be patient; don’t dump into thin bids. If you hold, track quarterly results and disclosure quality—SME governance dispersion is wide.

Conclusion

SME IPOs demand careful analysis and disciplined participation rather than reliance on hype. Applications typically involve a higher ticket size (often a minimum of two lots, around ₹2 lakh), require bids at a specified price, and include a market maker to provide trading support—not to underwrite liquidity.

Apply through ASBA or UPI, track the T+3 timeline closely, and size your exposure so that a slower exit does not impact your portfolio significantly. Success in SME IPOs comes from thorough diligence and measured participation.

Also Read

https://www.kotakneo.com/investing-guide/ipos/what-is-sme-ipo/