IPOs by emerging small and medium size companies with a strong track record, good financials, and robust growth plans attract a lot of investors to make good profits in long run. Prospective investors can apply for SME IPO online/digitally through ASBA net-banking process or via the UPI payment gateway app. The ASBA process allows investors to subscribe for SME IPO using your bank’s net banking portal. Unlike it, retail investors can apply to the SME IPO using UPI app with respective brokers given that your stockbroker accepts SME IPO applications.
Continue reading further to know who can apply in SME IPO, and how to apply in SME IPO with UPI or without UPI or net banking ASBA process.
Category of investors to apply for SME IPO
Retail investors, NRIs, companies, financial institutions, banks, FIIs, mutual fund houses, etc. can apply for a SME IPO. Prospective investors can subscribe to a SME IPO under the following three categories;
Retail Individual Investors (RIIs): Any individual investor whose total bid amount is less than Rs 2 lakh can invest as a retail applicant.
Non-Institutional Investors (NIIs): NRIs, companies, or individual investors who bid for more than Rs 2 lakh.
Qualified Institutional Bidders (QIBs): Institutional investors such as banks, mutual fund houses, financial institutions, and FIIs.
SME IPO Apply process through ASBA Net-Banking
Applicants interested to participate in the SME IPO bidding may apply through the ASBA process. ASBA (Applications Supported by Blocked Amount) is a facility that enables individuals to apply for a SME IPO via banks without deducting the amount immediately.
Steps to apply in SME IPO through ASBA Process;
Log in to your net banking account.
Go to the menu and search for the “IPO” option.
Among all open IPOs, select the IPO of your choice.
Click on the Apply option and enter details like IPO lot size, and price, and select the applicant’s category.
Once you’ve entered all the details, submit the IPO application order.
Upon order submission, the funds will be blocked into your bank account till allotment.
If you get the allotment of the shares, the funds will get debited or in case of rejection, funds will be unblocked.
SME IPO Apply process using UPI
Steps to apply in SME IPO through UPI;
Log in to your trading account.
Go to the IPO page, and select the SME IPO, you wish to apply in.
Tap on the “Apply” option respective to the IPO of your choice.
Enter details like lot size (number of shares) and your UPI ID.
Once details are entered correctly, you will receive a payment mandate request on the UPI app.
Accept the request to authorize the application amount payment. Once payment is done, the IPO application will be successfully placed on the exchange.
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Frequently Asked Questions
Is it good to invest in SME IPOs?−
Applying in an SME IPO is undoubtedly risky and therefore, recommended to high-risk taking investors. However, SME companies with good growth potential, impressive plans, and strong fundamentals may perform well and provide great returns to investors. These companies may be highly subscribed by investors including retail and institutional investors. Investors must perform due diligence and take extra care before investing in an SME IPO.
SME IPOs backed by strong growth trajectories, good fundamentals, proven business models, and growth plans are definitely a good option for high-risk appetite investors. These SMEs have the potential to deliver high returns to investors.
However, given the bigger lot size and liquidity concerns associated with SME IPOs, some IPOs may not receive good responses and investors may not get good listing gains. Thus, it is recommended to investors perform due care before bidding for an SME IPO.
Can HUF and LLP are eligible to apply in SME IPO?+
Yes, Hindu Undivided Family (HUF) is eligible to subscribe to the SME IPO in the name of Karta. Similarly, Limited Liability Partnerships (LLPs) which are registered in India and authorized to invest in the equity shares can invest in SME IPO.
Are retail investors eligible to apply in SME IPO?+
Yes, SME IPOs have a proportion of issue size reserved for the retail category of investors whose maximum bid value is upto Rs 200,000. It is to be noted that, unlike regular IPO that has a minimum trading lot of Rs 12,000-Rs.15,000, the minimum investment in SME IPO is above Rs 100,000.
Who can bid for an SME IPO?+
A list of bidders eligible to participate in an SME IPO includes the following;
Indian nationals resident in India
Hindu Undivided Family (HUF) in the individual name of Karta
SEBI-registered mutual fund houses
Eligible NRIs on repatriation or on a non-repatriation basis
Financial institutions including scheduled commercial banks, cooperative banks, and regional rural banks
Foreign Portfolio Investors (FPIs)
Limited Liability Partnerships (LLPs) registered in India and allowed to invest in equity
Insurance companies registered with IRDA
Provident funds and pension funds
Any other person who is eligible to apply for the offer under applicable laws, rules & regulations.
How to invest in SME IPO under NII category?+
Non-Institutional Investors (NIIs) are applicants who invest more than Rs 2 lakh in an IPO, therefore, they can invest in the SME IPO through their bank account supporting ASBA facility.
Can I apply in SME IPO using UPI?+
Yes, if you’re a retail investor or individual and your stockbroker allows investment in SME IPO then you can apply through UPI. The maximum application or investment amount in SME IPO via UPI app is Rs 2 lakh.
Who are anchor investors in SME IPO?+
Any Qualified Institutional Bidder who bid for at least Rs 200 lakhs or 2 crores in SME IPO is known as an Anchor investor. It includes mutual fund houses, insurance companies, foreign portfolio investors (FPIs), etc. As per the SEBI’s regulation, an SME can allocate up to 60% of the QIB portion to Anchor Investors.
Can an SME IPO be undersubscribed?+
No, as an SME IPO issue needs 100% underwriting therefore, in case if the issue is undersubscribed underwriters will be responsible to buy all the remaining shares. When the demand for an initial public offering of an SME company is less than the number of shares issued to the public is known as under-subscription.
Is SME IPO profitable?+
Yes, SME companies with strong financial track and proven management attract a large number of investors for the IPO issue. Strong IPO demand results in higher subscriptions and can be expected to provide good listing gains or returns. However, SME IPOs are high-risk bets so before applying, you must analyze the company’s valuation, financials, business model, and niche in the segment.
How to apply in SME IPO?+
There are two ways to invest or apply in an SME IPO through the net banking ASBA or UPI via a stockbroker, explained below;
Are HUFs eligible to apply for SME IPO in the retail category?+
Yes, HUFs can also apply for SME IPO in the retail category. All IPO applications by residents, HUF, or NRI upto Rs 2 lakh are considered applications under the retail category.
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