Though the decision to go public via SME IPO provides required access to capital, there is a huge cost involved too. The cost of SME IPO listing can be ranged from 7% to 15% of IPO issue size depending upon the complexities of the IPO issue process. So, Promoters who are planning to take their SME public must be aware of how much does SME IPO cost?
Cost is front-loaded in SME public issue. SME IPO cost or issue – related expenses include lead manager/merchant banker fees, underwriting commission, and SME exchange listing fees, among others. The listing fee payable to the exchange also varies across the two platforms – BSE SME and NSE SME (NSE Emerge).
The issuer company also engages with various professionals who charge an advisory fee for their services, such as legal advisors, consultants, auditors, bankers to the issue, Sponsor banks, etc. Besides this, the cost of printing DRHP and prospectus, marketing, and advertisement expenditures are the additional expenditures incurred.
All in All, the SME IPO cost-breakup can be bifurcated as;
BSE or NSE SME Exchange Listing Fee
Service fee charged by other intermediaries
Above that, after listing, SMEs incur compliance cost on reporting & disclosure, payment of annual listing fee, and others.
Merchant Banker Fee for SME IPO
Though merchant banker is also an intermediary in the IPO issue process, but we’ve classified it into a separate category because nearly half of total SME IPO cost goes into the pocket of merchant bankers.
Merchant Bankers also called lead managers are the investment bankers who assist the IPO-going company from start to end. Everything from drafting documents to seeking exchange approval, regulatory compliance, due diligence, issue pricing, underwriting – all are done by merchant bankers. In return, they charge a fee for the services offered.
Merchant bankers typically may charge anywhere between 2% - 5% of IPO offer price. Thus, the fees charged can range from 30-40 lakhs to a few crore. In smaller issue sizes say Rs 10 crore IPO, if a merchant banker takes 5% fee, the amount will be Rs 50 lakh. But the bigger the SME IPO offer size is, say Rs 100 crore, even at a 4% fee, the company will pay Rs 4 crore to merchant bankers.
Evidencing the crucial role of a merchant banker in the IPO success, it becomes important to select the right merchant banker with a good success track record.
BSE SME and NSE SME IPO Fee Structure: At a Glance
Check out the exchange-wise SME IPO listing fee structure at BSE SME and NSE SME.
Planning to get listed on BSE SME exchange? If yes, refer below the BSE SME Listing Fees schedule;
Effective from 1st Nov 2023, companies desirous of getting listed on the NSE Emerge are required to pay the following charges to the exchange;
The processing fee is payable at the time of in-principal application.
Initial Listing fee is paid at the time of final listing application to the designated exchange.
Bid verification fee is paid at time when the SME IPO issue opens for the public subscription.
The issuer company has to provide a No Objection Certificate (NOC) to the relevant exchange (BSE SME and NSE Emerge) for the release of 1% of the deposit of the issue amount. The lead merchant banker has to submit a written application in the SEBI-specific format to obtain NOC.
BSE SME and NSE SME Annual Listing Fee
Annual Listing fee is a part of post-listing compliance cost. Publicly listed SMEs are required to pay annual listing fees from subsequent financial year after they get listed on the exchange.
Earlier, NSE Emerge was following a tiered fee structure based on the company’s paid-up capital but now both BSE SME and NSE SME platforms charge an annual listing fee based on market capitalization.
To calculate the listing fee per annum, market capitalization will be taken at the share’s closing price as of 31st March or the last trading session in the financial year.
Company’s market capitalization = post-issue number of shares * SME’s last traded price as on 31st March
Service fee charged by other intermediaries
Many intermediaries are involved in the SME IPO issue process and all of them charge a service fee from the company.
Miscellaneous expenditures in SME IPO
Other expenditures involved in the SME IPO issue process are;
Marketing and advertising expenses and cost for roadshows
Printing and distribution expenditures i.e., printing DRHP and RHP, filing to exchange.
Out-of-pocket expenses on traveling, documentation or document management, communications, etc
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Frequently Asked Questions
What is the annual listing charge to list shares on the BSE SME segment?−
Small and medium-sized companies with securities listed on the BSE SME platform are charged a listing fee every year. In this regard, BSE SME Index charges an annual listing fee of higher of Rs 25,000 or 0.01% of the market capitalization of the last trading session in the financial year.
How does NSE Emerge charge listing fee?+
Listing securities by a small and mid-sized company attracts an annual listing fee from Rs 10,000 to Rs 45,000. The Emerge NSE platform charges a listing fee on the basis of the company’s paid-up capital, higher paid-up capital means higher listing charges or vice-versa.
Paid up capital upto 5 crores: Rs 10,000
Paid up capital from 5 crore – 10 crore: Rs 15,000
Paid-up capital from 10 crore – 20 crore: Rs 25,000
Paid-up capital from 20 crore – 25 crore: Rs 45,000
What is the listing fee on SME platform?+
The BSE SME and NSE SME (NSE Emerge) platform charges a listing fee of Rs 50,000. The listing fee is a one-time charge or payment that has to be paid at the time of shares listed on the SME exchange.
What are the expenditures incurred in SME IPO?+
There are many parties involved in an SME IPO issue and listing process who charge a service fee from the issuer company. SME IPO expenses include expenditures on marketing, advertising, lead manager fee, legal compliance cost, listing fee, market maker fees, merchant banker fees, commissions to underwriters, etc.
How much does it cost to issue an SME IPO?+
The cost to raise funds via SME IPO depends upon the platform an SME seeks to list its shares. Both the SME segment at BSE and NSE charge initial share listing fees, processing fees, and annual listing fees from the share issuing entity.
Companies seeking to list securities on the BSE SME platform have to pay a one-time processing fee of Rs 50,000 and an annual listing fee of higher of Rs 25,000 or 0.01% of the company’s market cap.
NSE SME platform charges an initial listing fee of Rs 25,000 and a processing fee of Rs 25,000. Moreover, it charges an annual listing fee ranging from Rs 10,000 to Rs 45,000 based on the company’s paid-up capital.
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