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
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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.
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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
- Demat mapped to your PAN; KYC up to date.
- Bank supports ASBA/UPI for IPOs and has sufficient free limits for a ₹2+ lakh block.
- Read the RHP—use of funds, risks, customer/vendor concentration, market-maker terms.
- Decide price and at least two lots; avoid last-hour edits.
- If using UPI, accept the mandate immediately and verify the block.
- On allotment day, reconcile. If not allotted, ensure funds are unblocked; if allotted, confirm demat credit before listing.
- 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.kotaksecurities.com/investing-guide/ipos/what-is-sme-ipo/
FAQs
Can I bid at “cut-off” in an SME IPO?
Typically no—SME issues require you to enter a specific price within the band. Always check the RHP and your broker’s IPO page to confirm the rule for that offer.
Why is the minimum application size so high in SME IPOs?
The higher ticket (often two lots, around ₹2 lakh or more) keeps speculative micro-applications low and aligns the investor base with the segment’s liquidity profile. It also simplifies allotment and post-listing market making.
Does the presence of a market maker guarantee easy exits after listing?
No. Market makers provide two-way quotes and support discovery, but depth can still be limited, especially in volatile sessions. Use limit orders and size positions so you’re never forced to dump into thin bids.
This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in securities market are subject to market risks, read all the related documents carefully before investing. Brokerage will not exceed SEBI prescribed limit. The securities are quoted as an example and not as a recommendation. SEBI Registration No-INZ000200137 Member Id NSE-08081; BSE-673; MSE-1024, MCX-56285, NCDEX-1262.
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