Introduction: IPOs in India and Their Growing Popularity
In recent years, Initial Public Offerings (IPOs) have become an increasingly popular investment avenue in India. With a booming stock market and more retail participation than ever before, IPOs have opened the door for both seasoned and first-time investors to own equity in promising companies. Two major types of IPOs dominate the Indian markets—Mainboard IPOs and SME IPOs. While the difference in minimum lot size is often highlighted, there are several critical distinctions investors need to understand before choosing where to allocate their capital.
This article is your complete 2025 guide to understanding Mainboard vs SME IPOs. From eligibility, listing platforms, risk factors, and growth potential to who should invest in which type, we break it all down for you.
What is a Mainboard IPO?
A Mainboard IPO is an initial public offering by companies listed on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) Mainboard. These companies meet stringent listing norms and are often well-established businesses with strong operational and financial performance.
Key Characteristics:
- Listing Platforms: NSE or BSE Mainboard
- Eligibility Norms: Minimum paid-up capital of ₹10 crore; a track record of profitability
- Investor Base: Open to retail, HNIs, QIBs, and institutional investors
- Anchor Investors: Often includes mutual funds, insurance companies
- Liquidity: High, due to wider investor base and market coverage
Real Examples:
- LIC IPO
- Zomato IPO
- Nykaa IPO
What is an SME IPO?
An SME IPO is launched by small and medium enterprises that get listed on platforms such as NSE EMERGE and BSE SME. These platforms were developed to enable smaller companies to raise capital efficiently and access public markets.
Key Characteristics:
- Listing Platforms: NSE EMERGE or BSE SME
- Eligibility Norms: Relaxed compared to Mainboard IPOs; usually a paid-up capital of ₹1 crore+
- Investor Base: Primarily HNIs and seasoned retail investors
- Lot Size: Higher (₹1–2 lakh per application)
- Liquidity: Relatively lower than Mainboard
Real Examples:
- Droneacharya Aerial Innovations
- Rachana Infrastructure
Comparison Table: Mainboard IPO vs SME IPO
| Feature | Mainboard IPO | SME IPO |
|---|---|---|
| Minimum Investment (Lot Size) | ₹15,000 – ₹20,000 | ₹1–2 lakh |
| Liquidity | High | Low |
| Regulatory Oversight | Strict (SEBI) | Moderate |
| Eligibility Criteria | High | Relaxed |
| Risk Profile | Moderate | High |
| Growth Potential | Steady | High (volatile) |
| Investor Base | Retail, HNI, QIB | HNI, Sophisticated Retail |
| Listing Platform | NSE/BSE Mainboard | NSE EMERGE/BSE SME |
Advantages and Disadvantages
✅ Advantages of Mainboard IPOs:
- Highly liquid secondary market
- Transparent compliance and regulations
- Institutional support
- Often backed by strong fundamentals
❌ Challenges of Mainboard IPOs:
- High oversubscription leading to poor allotment chances
- Smaller short-term gains compared to SME IPOs
- May be overvalued due to hype
✅ Advantages of SME IPOs:
- High-growth potential
- Often undervalued at listing
- Higher allotment probability
- Flexible eligibility for companies
❌ Challenges of SME IPOs:
- Lower liquidity (difficult to exit)
- Higher risk of fraud or poor governance
- Lack of media/analyst coverage
- High capital requirement due to larger lot size
Investor Profiles: Who Should Invest Where?
| Investor Type | Ideal IPO Type |
| First-time investor | Mainboard IPO |
| Conservative investor | Mainboard IPO |
| High net-worth individual | SME IPO |
| Risk-tolerant investor | SME IPO |
| Long-term fundamental investor | Both (case-by-case) |
Liquidity and Exit Strategy
- Mainboard IPOs are actively traded and offer strong exit opportunities.
- SME IPOs often have a market maker who provides some liquidity but may not be sufficient.
- Exit can take longer in SME IPOs unless fundamentals attract buyers post-listing.
Returns Analysis (2018–2024)
Mainboard IPOs:
- Average Returns (Post Listing 1 Yr): 12–25%
- Best Performers: IRCTC, Nazara Tech
SME IPOs:
- Average Returns (Post Listing 1 Yr): 30–150%
- Best Performers: Droneacharya, Ekennis Software
How to Apply for Mainboard & SME IPOs
- Mainboard IPOs: Apply via UPI/ASBA through brokers or apps like Zerodha, Groww.
- SME IPOs: Requires a demat and trading account that allows SME investments. Some platforms restrict SME IPO participation.
Regulatory Bodies and Market Infrastructure
- SEBI regulates both Mainboard and SME platforms.
- NSE EMERGE and BSE SME platforms offer compliance support.
- Merchant bankers play a key role in underwriting SME IPOs.
Final Verdict: What Should You Choose?
If you are:
- Looking for stable returns, high liquidity, and lower risk → Mainboard IPOs
- Willing to take calculated risks for potentially higher returns → SME IPOs
A blended portfolio with exposure to both segments based on company fundamentals can be ideal.
FAQs
Q: Are SME IPOs risky?
Yes. They carry a higher risk but also offer higher rewards.
Q: Why is the lot size for SME IPOs so large?
To ensure only serious investors participate and to support low liquidity post-listing.
Q: Can retail investors apply for SME IPOs?
Yes, provided their brokers support SME segment applications.
Q: Do SME IPOs offer better returns than Mainboard IPOs?
On average, yes. But they also come with higher volatility.
Q: Is it easy to exit from SME IPOs?
Not always. Market makers support some exit, but volumes are lower.
Conclusion
Both Mainboard and SME IPOs play vital roles in India’s capital markets. While Mainboard IPOs offer safety and liquidity, SME IPOs provide aggressive growth opportunities. With proper research and a balanced approach, investors can profit from both segments.
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