India’s major stock exchanges—the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)—have introduced a new bidding framework for SME IPOs, raising minimum bid requirements and eliminating cut-off price bidding. These changes, which will become mandatory from July 1, 2025, aim to streamline the SME listing process and improve investor clarity and efficiency.
The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), two of India’s premier stock exchanges, have announced a significant revamp in the bidding mechanism for Small and Medium Enterprises (SME) Initial Public Offerings (IPOs). These new rules will become mandatory from July 1, 2025, aiming to bring greater standardization and efficiency to the SME public issue framework.
Headquartered in Mumbai, Maharashtra, NSE and BSE play a crucial role in regulating and facilitating equity listings in India. This latest move targets improved investor categorization, minimum bidding limits, and operational clarity during IPO processes.
Key Reforms in SME IPO Process
- New Definition for Individual Investors
The term Retail Individual Investor has been redefined as Individual Investor. To qualify, an individual must apply for a minimum of two lots, with the application amount exceeding ₹2 lakh, a noticeable increase from earlier norms catering to smaller retail investors.
- Increased Minimum Bid Size
The minimum bid size for all individual categories is now two lots, with an application amount above ₹2 lakh. This aims to encourage more serious participation and reduce frivolous bidding.
- Cut-off Price Bidding Eliminated
Bidding at the cut-off price is no longer allowed for any investor category under the new framework.
- No Scope for Downward Modifications or Cancellations
Once a bid is submitted, investors cannot reduce or cancel their bids. This will help maintain bid integrity and streamline allocation processes.
- Revised Bidding Timings
On the final bidding day, all categories will close at 4:00 PM, while UPI mandate acceptance will remain open until 5:00 PM, giving applicants an additional hour for payment confirmations.
- Updated Rules for Reserved Categories
- Employees must apply for at least two lots with bids exceeding ₹2 lakh, up to a maximum of ₹5 lakh.
- Shareholders and Policyholders will also need to meet the two-lot minimum.
- Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs) must exceed the two-lot threshold.
Dual System Transition Timeline
The existing and new systems will coexist for IPOs that open on or before June 30, 2025. In case of spillover, the dual system can continue until July 11, 2025, after which only the new bidding process will apply to all SME IPOs.
This updated SME IPO mechanism is expected to improve transparency and attract more substantial and serious investment into India’s small and medium-sized businesses, contributing to stronger capital market growth and entrepreneurship in the country.
