SME IPO Allotment Process

Applicants who have been successfully allotted SME shares can check the shares in their demat account. You can sell shares on or after the date of IPO shares listing on the SME exchange. Investors can sell shares simply by placing a sell order through their trading account on the designated exchange BSE or NSE SME. They can place either a market sell order (sell order at a market price) or a limit order (share sell order at the specified price).

Likewise regular IPO, the registrar is responsible for the allotment of the shares in an SME IPO. Based on the subscription or total bidding received for a particular SME IPO, the registrar prepares a basis of allotment (BOA) for the allocation of shares to different categories of investors, processes refunds, and transfers shares to the investor’s demat account. Shares are allocated to investors based on the criteria set by regulators in the IPO prospectus.

An SME IPO must be subscribed by atleast 50 applicants to comply with the BSE and NSE SME exchange listing norms for allotment. If a small and medium size company fails to attract investors to apply for the issue and number of applicant falls below 50 then the issue will be withdrawn.

Under the retail category, if the total number of SME IPO applications exceeds the shares offered, then allotment will be done through a computerized lottery draw process.

If the issue is oversubscribed by a small margin, then one lot will be allotted to each applicant and proportionate allotment will be done to remaining investors who’ve applied for more than one lot.

However, in case of oversubscription by a large margin, the registrar will first calculate the maximum number of retail investors for allotment. Investors will be selected through a lucky draw process without any partiality for allotment.

 You can check the SME IPO subscription details online across both the BSE SME and NSE SME exchange by following the below steps;

BSE SME IPO Subscription check

1. Visit the BSE SME website.
2. Go to Public Issue > public issue watch.
3. Click on the company name, you want to check to bid for.
4. On the top, tap on the BSE Bid Details to check the live subscription.

NSE SME IPO Subscription check

1. Head to the NSE Emerge web portal.
2. Go to “IPO Current Issues” under the Live Market tab.
3. Click on the View bid details-NSE respective to the IPO of your choice.

There are multiple reasons behind rejection or no allotment such as follows;

• If your bid is Invalid given that you have provided incorrect PAN number or Demat account number.
• If multiple number of IPO orders have been submitted on a single PAN number.
• Your application has not been selected in the lucky draw process.

In an SME IPO, allotment is done by the registrar based on the criteria set and published in the RHP document. The IPO registrar prepares the basis of allotment showing the demand for the IPO and allocation ratio to different categories of investors in line with the applicable rules & regulations set by SEBI.

No, allocations of shares to applicants in an IPO do not depend on a first come first serve basis rather it works on how the IPO gets investors' response. If an SME receives a full-subscription or under-subscription (Applications received are equal to or less than the shares offered), then all the investors will get a full allotment of shares they have bid for. Unlike it, in case of over-subscription (Application received exceeds the number of shares offered), then allotment to retail investors will be done on a computerized draw process.

When an IPO opens for subscription, investors from different categories like RII and NII start applying for shares. Shares will be allotted within a week after the IPO issue closure.

Yes, you can sell allotted SME IPO shares on the listing day or afterwards.

An investor can sell shares of a listed SME company on the day when the securities get listed and traded on either the BSE or NSE SME exchange.

SME IPO shares are traded in lots only say 1 lot, 2 lot, etc. means you cannot sell a single SME share.

Yes, as per market regular SEBI, 50% of the equity shares allotted in the Anchor Investor Portion shall be locked in for 90 days, and the rest 50% of the shares will have a lock-in period of 30 days from the date of allotment. The lock-in period is the minimum time frame an investor cannot sell their allotted shares. Once the lock-in period ends, they are free to sell shares on the exchange.

Yes, for an SME company seeking to raise capital via the IPO route, promoters’ holdings upto 20% of the post-issue capital will be locked in for a period of 3 years.

Whenever a company decides to go public, the issuing company and syndicate members together open an escrow account with collection banks. Any applicants who wish to apply in the IPO submit applications to the syndicate members with payment of application money in favor of the escrow collection banks. The banks will keep the money till the designated date and afterward, all the funds will be transferred to the bankers to the issue.