All the way to listing day

A mainboard IPO refers to listing on the National Stock Exchange (NSE) Main Board or the Bombay Stock Exchange (BSE) Main Board. An SME IPO refers to listing on the SME platforms — NSE Emerge or BSE SME. The two differ across several dimensions:

• Eligibility criteria: Mainboard eligibility is governed by Regulation 6 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) — either through the profitability route (Regulation 6(1)) or the compulsory book-building route (Regulation 6(2)). SME eligibility is governed by Chapter IX of the ICDR Regulations, with separate exchange-level criteria.
• Regulator-facing process:
  • Mainboard: the DRHP is filed with SEBI for observations alongside the exchange, and SEBI issues observation letters over potentially multiple rounds of queries.
  • SME: the DRHP is filed directly with the exchange (NSE Emerge or BSE SME) — SEBI does not issue observations on SME issues, and the exchange manages the diligence.
• Underwriting and market making: SME IPOs require 100% underwriting and mandatory market making for a prescribed period after listing. Mainboard IPOs do not have these specific requirements.
• Investor base and lot sizes: Mainboard IPOs target retail investors, HNIs, and Qualified Institutional Buyers, with relatively small lot sizes. SME IPOs have larger lot sizes (typically ₹2 lakh and above), effectively restricting retail participation to those who can afford the larger lot.
• Migration: SME-listed companies that subsequently meet mainboard eligibility can migrate to the mainboard under Chapter IX of the ICDR Regulations.

The choice between mainboard and SME depends on the company's size, eligibility, and the kind of investor base and liquidity profile it wants to attract.

The eligibility criteria differ between mainboard and SME IPOs and are prescribed under the ICDR Regulations.

• Mainboard — Profitability route (Regulation 6(1)): A company is eligible if it meets all of the following on a restated and consolidated basis:
  • Net tangible assets of at least ₹3 crore in each of the preceding three full years, with not more than 50% held in monetary assets
  • Average operating profit of at least ₹15 crore in any three years out of the preceding five years
  • Net worth of at least ₹1 crore in each of the preceding three full years
  • If the company has changed its name in the preceding one year, at least 50% of revenue should be derived from the activity indicated by the new name
• Mainboard — Compulsory book-building route (Regulation 6(2)): If the company does not meet the profitability route, it may proceed by allotting at least 75% of the net offer to Qualified Institutional Buyers, refunding the application money if that minimum QIB subscription isn't met.
• SME IPO (Chapter IX of the ICDR Regulations): The SME criteria are less stringent than mainboard's overall. However, the profitability criterion has become considerably more specific: for DRHPs filed on or after April 1, 2025, an SME issuer must show:
  • Operating profit (EBITDA) of at least ₹1 crore in any two of the preceding three financial years
  • Net tangible assets, net worth, and minimum existence period as prescribed under Chapter IX
  • The "fit and proper" criteria for promoters and directors prescribed under Chapter IX and the relevant exchange's listing rules
• Commercial and practical filters: In addition to the statutory criteria, exchanges and Merchant Bankers apply commercial filters such as governance maturity, audit history, related party transaction practices, and management quality before taking the issue forward.

An IPO readiness assessment evaluates the company against both the statutory criteria and these practical filters.

The Merchant Banker and the company-side IPO advisor play different roles in the IPO process:

• Merchant Banker: A SEBI-registered Category I Merchant Banker manages the IPO issue:
  • Acts as the Lead Manager / Book Running Lead Manager (BRLM)
  • Drafts the DRHP, with inputs from the company and its advisors
  • Files the DRHP with SEBI (for mainboard) or the exchange (for SME)
  • Coordinates with SEBI and the exchange on observations
  • Determines pricing in consultation with the company
  • Manages the book-building and allotment process
  • Coordinates with the registrar, underwriters, and the exchange for the listing
  The Merchant Banker is regulated by SEBI under the SEBI (Merchant Bankers) Regulations, 1992 and is accountable to SEBI for the integrity of the issue.
• Company-side IPO advisor: Sits beside the company through the journey, preparing it for the IPO and supporting its operational, financial, and regulatory work:
  • Conducts the IPO readiness assessment
  • Manages pre-IPO corporate restructuring
  • Drives financial systems and reporting readiness — restated financials preparation, CMA data, MIS systems, internal financial controls
  • Supports DRHP content (such as industry sections, business description, risk factors, KMP profiles, related party disclosures)
  • Coordinates with the Merchant Banker, legal counsel, auditors, and other advisors
  • Supports responses to exchange and SEBI queries
  • Provides Fractional CFO support through the IPO journey
• Why both are typically engaged: The Merchant Banker manages the issue. The company-side advisor prepares the company for the issue and supports it through the multi-year journey. These are complementary roles.

After the DRHP is drafted and filed with the regulator, the process moves through several broad stages:

1. Observations: The regulator reviews the DRHP and issues observations — queries, clarifications, or required revisions. For mainboard IPOs, SEBI issues observations alongside the exchange. For SME IPOs, the exchange manages the observation process. SEBI does not issue observations on SME issues. Multiple rounds of observations may be issued before an in-principle approval or observation letter is given.
2. Updated DRHP: Based on the observations, the DRHP is revised and the updated DRHP is filed with the regulator, incorporating the responses and any other revisions.
3. Red Herring Prospectus (RHP): Once observations are cleared, the RHP is filed with the Registrar of Companies before the issue opens, including the price band or floor price, the issue size, and other final issue terms.
4. Issue opens: The IPO opens for subscription, across the prescribed investor categories — retail, non-institutional, QIB, and (for SME issues) the Market Maker portion.
5. Basis of allotment: After the issue closes, the Merchant Banker, the registrar to the issue, and the exchange finalise the basis of allotment in accordance with the ICDR Regulations and the issue documents. Shares are credited to allottees' demat accounts. Refunds are processed for unsuccessful applicants.
6. Listing: The shares are listed on the relevant exchange and trading commences, involving specific statutory and exchange compliances — pre-listing notifications, post-listing intimations, and the listing event itself.