Average number of retail applicants in SME IPOs jumps from mere 30,000 to 2.3 lakh in just four years

The recent past has seen the SME IPO segment grab many headlines and, more often than not, it has been due to regulatory concerns and probes related to the quality of disclosures and governance

The Securities and Exchange Board of India (SEBI) along with the two stock exchanges – BSE and NSE – have been trying hard to tighten the norms for the SME IPO segment but that has not stopped a flood of retail investors in the segment with the number of such investors jumping by more than 600 times in the last four years.

Data shows that the average number of retail applicants in SME IPOs has crossed the two lakh mark in the current calendar year – a huge jump since this used to be in thousands till two years back.

The average number of retail applicants in SME IPOs is pegged at nearly 2.3 lakh in 2025, significantly higher than 29,755 in 2022. The average number increased to 78,450 in 2023 before crossing the lakh mark in 2024 to touch 1.88 lakh.

This assumes significance as the recent past has seen the SME IPO segment grab many headlines and, more often than not, it has been due to regulatory concerns and probes related to the quality of disclosures and governance.

Further, this comes at a time when a large section of market participants believes that there should be some entry barriers to bar retail investors to certain extent as the quantum of risk in an SME IPO is higher than that of a mainboard IPO.

“630 times in just 4 years… This shows the tremendous attention SME IPOs have attracted from retail investors, a large part of it being due to listing gains which also increased from an average of 1% to 60% in the same period,” says Pranav Haldea, Managing Director, PRIME Database Group.

“The huge participation of retail investors now in this segment also calls for greater scrutiny of the companies launching their IPOs,” he added.

Incidentally, both NSE and BSE launched their separate dedicated platforms for SME IPOs way back in 2012 and the first few years saw just a few hundred retail investors on an average participating in the segment.

There was a sudden spike in 2017 when the average jumped to 8,361 as 133 SMEs launched their public issues – it was the first calendar year since the launch of the platforms when more than 100 SME IPOs hit the market.

But the surge was short-lived as the next year saw the number dip to 3,222 before plunging further to 748 in 2019 before COVID hit markets globally and the SME IPO segment saw the average number falling to less than 300.

As data shows, the real surge started 2022 onwards, which was also the time when the segment began seeing heightened traction in terms of both subscription and listing. A look at the top 10 SME IPOs in terms of subscription and listing reveals that most of the offerings happened either in 2023 or 2024.

Regulatory Tightening

In December, SEBI tightened the regulatory framework for SME IPOs to allow only those entities that have an operating profit in at least two of the previous three years while barring companies from raising funds to repay loans to promoter entities.

In terms of the profitability clause, SEBI decided that only such SMEs can come out with an IPO that have an operating profit (earnings before interest, depreciation and tax) of Rs 1 crore from operations for any two out of three previous financial years at the time of filing the draft red herring prospectus (DRHP).

Among the key changes, SEBI said that the offer for sale (OFS) portion of an IPO cannot exceed 20% of the total issue size and selling shareholders cannot sell more than 50% of their holding.

Further, the amount for General Corporate Purpose in SME IPO has been capped at 15% of the IPO size or Rs 10 crore, whichever is lower. Meanwhile, the IPO draft documents filed with the stock exchanges will be made available for 21 days for public to provide comments on the document.

In November last year, SEBI had come out with a discussion paper to review the listing framework for SME IPOs, proposing an increase in the minimum application size to Rs 2 lakh from the current Rs 1 lakh per application, among other things.

In July last year, NSE decided to place an overall cap of 90 percent over the issue price for SME IPOs on the day of listing during special pre-open session.

In March, SEBI chairperson Madhabi Puri Buch had said that the market regulator has noticed "signs of manipulation in the SME segment".

The year 2024 was a record year in terms of fund raising by SME IPOs as more than 225 companies raised more than Rs 8,200 crore, a huge jump from Rs 4,686 crore in 2023.