The Significance Of SMEs Getting Their Foot Into The IPO Door
As one of the top SME IPO Consultants, we have observed a spike in Small and Medium-sized Enterprises (SMEs) showing interest in entering the Initial Public Offering (IPO). 234 companies have raised funds in 2023 from Indian markets, according to Trendlyne. A significant portion of these companies fall within the SME segments amounting to 176 companies.
So, what’s the big deal about entering into the IPO segment and how can it help SMEs scale their business? Read to the end to find out!
What Does IPO Mean For SMEs?
The Initial Public Offering (IPO) is a means for private companies to offer shares of their stock to the public. If the company is successful in doing this, it will be then referred to as a publicly traded company. This process involves selling a portion of its ownership to investors in exchange for capital.
Typically, family-run businesses are not interested in handing over a portion of their company’s control to third-party investors. However, they find more reliability in sharing their company’s portion with the public. There are several benefits associated with this practice of listing in the IPO.
Why Should SMEs Get Listed As A Publicly Traded Company?
Let’s explore the benefits SMEs can have and enjoy while listing in the IPO.
- As opposed to third-party investors, SMEs that enlist in IPO have little to no interference in day-to-day operations.
- The company’s credibility is enhanced in terms of value and prestige once its shares are listed on the BSE and NSE platforms. It helps the company gain a competitive advantage while providing more visibility of the business.
- SMEs can raise funds to achieve various milestones for the company, including research and development, expansion, debt payment, acquisitions, and working capital.
- Going public provides liquidity for the current shareholders of an SME. This includes early investors, if any; founders, and employees, by allowing them to sell their shares on the secondary market.
- The liquidity process also provides an option to incentivize key stakeholders and attract relevant talent by offering them stock-based compensation.
- SMEs that are converted to publicly traded companies can also use their stock currency as a mode of payment in mergers and acquisitions. In the process, the company can easily pursue growth through strategic transactions.
As one of the upcoming IPO Consultants in India, we can provide your SME firm with the advice you need to get listed as a publicly traded company. Firstly, you want to know whether you are eligible to be listed as one; let’s find out.
Eligibility Criteria And Requirements For Listing An SME
Is it easy for SMEs to get listed as a publicly traded company?
- The post-issue paid-up capital should be at a minimum of Rs 3 crores and not exceeding Rs 25 crores.
- The SME should have reported profits within a year in the last three years.
- The SME should have been incorporated at a minimum of two years before applying for an SME IPO.
Do you need professional assistance in becoming a publicly traded company? At Consulting & Beyond, we have a team of expert SME IPO Consultants to advise you, including preparing a client’s pitch deck and one-pager, evaluating your data, financials, and much more.
FAQs
- Is it possible for my SME business to get listed in an IPO?
Yes, as long as you match the specified criteria set by The Securities and Exchange Board of India (SEBI).
- How can you help me get listed as an SME?
As one of the best IPO Consultants in India, we have the expertise to guide you throughout the process from evaluating your business, advising you whether it is the right time to list, and connecting with the right merchant bankers, among other consultation services.
- Once my SME is listed, can I give an exit to a third-party investor that has been investing in my company for quite some time?
This depends on factors such as the performance of your company’s stock after being listed and the kind of operations you need funding for, etc. Also since the shares are now a liquid asset that can be done effectively
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