The National Stock Exchange (NSE) has implemented significant changes to SME IPO bidding norms effective July 1, 2025. According to NSE circular dated June 18, 2025, the existing retail individual investor (RII) category has been replaced by the individual investor category, which requires a minimum application size exceeding ₹2 lakh and includes a minimum of two lots. The new framework also eliminates the facility to place bids at cut-off price and prohibits downward modification or cancellation of bids for any investor category.
As reported by NSE data, 30 SME IPOs have raised funds during the current period, compared with just 9 mainboard IPOs that listed during the same timeframe. While retail participation remains robust in the SME space, not all retail investors are able to subscribe to these offers due to the revised bidding norms. The higher minimum investment size has created barriers for smaller retail investors who previously participated in SME IPOs. However, the SME IPO market has evolved significantly, with platforms now serving as a real alternative for entrepreneurs seeking institutional capital, particularly for profitable small manufacturers.
According to the new framework, employee category investors must apply for minimum two lots with application size above ₹2 lakh, not exceeding ₹5 lakh. In the shareholder and policyholder categories, the minimum application size remains two lots with application size exceeding ₹2 lakh. Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs) are required to apply for more than two lots. All bidding closes at 4:00 PM on the last day of the issue, with UPI mandate acceptance available until 5:00 PM.
The SME IPO framework has been designed to allow participation primarily from investors who can afford relatively high risk associated with these offerings. As reported by NSE, the higher bidding size restricts participation to investors willing and able to commit larger capital amounts. The framework aims to mitigate high-risk associated with SME IPOs by serving as an entry barrier, as these issues are comparatively small, less liquid, and more susceptible to speculation. The relatively higher application size is intended to reduce excessive retail speculation in the SME IPO market.
