Though the decision to go public via SME IPO provides required access to capital, there is a huge cost involved too. The cost of SME IPO listing can be ranged from 7% to 15% of IPO issue size depending upon the complexities of the IPO issue process. So, Promoters who are planning to take their SME public must be aware of how much does SME IPO cost?
Cost of SME IPO Issue
Cost is front-loaded in SME public issue. SME IPO cost or issue – related expenses include lead manager/merchant banker fees, underwriting commission, and SME exchange listing fees, among others. The listing fee payable to the exchange also varies across the two platforms – BSE SME and NSE SME (NSE Emerge).
The issuer company also engages with various professionals who charge an advisory fee for their services, such as legal advisors, consultants, auditors, bankers to the issue, Sponsor banks, etc. Besides this, the cost of printing DRHP and prospectus, marketing, and advertisement expenditures are the additional expenditures incurred.
All in All, the SME IPO cost-breakup can be bifurcated as;
- Merchant Banker Fee
- BSE or NSE SME Exchange Listing Fee
- Service fee charged by other intermediaries
- Miscellaneous expenses
Above that, after listing, SMEs incur compliance cost on reporting & disclosure, payment of annual listing fee, and others.
1. Merchant Banker Fee for SME IPO
Though merchant banker is also an intermediary in the IPO issue process, but we’ve classified it into a separate category because nearly half of total SME IPO cost goes into the pocket of merchant bankers.
Merchant Bankers also called lead managers are the investment bankers who assist the IPO-going company from start to end. Everything from drafting documents to seeking exchange approval, regulatory compliance, due diligence, issue pricing, underwriting – all are done by merchant bankers. In return, they charge a fee for the services offered.
Merchant bankers typically may charge anywhere between 2% - 5% of IPO offer price. Thus, the fees charged can range from 30-40 lakhs to a few crore. In smaller issue sizes say Rs 10 crore IPO, if a merchant banker takes 5% fee, the amount will be Rs 50 lakh. But the bigger the SME IPO offer size is, say Rs 100 crore, even at a 4% fee, the company will pay Rs 4 crore to merchant bankers.
Evidencing the crucial role of a merchant banker in the IPO success, it becomes important to select the right merchant banker with a good success track record.
2. BSE SME and NSE SME IPO Fee Structure: At a Glance
Check out the exchange-wise SME IPO listing fee structure at BSE SME and NSE SME.
BSE SME IPO Fee Structure
Planning to get listed on BSE SME exchange? If yes, refer below the BSE SME Listing Fees schedule;
| Initial Processing Fee | Rs 50,000 (One-time) |
| Exchange refundable deposit | 1% o the IPO offer size |
| Security Deposit | 1% of the issue amount to be paid before the issue opens |
| Bid Verification charges | 0.01% of the issue size subject to minimum charges of Rs 25,000 and maximum Rs 50 lakhs |
NSE SME IPO Fee Structure
Effective from 1st Nov 2023, companies desirous of getting listed on the NSE Emerge are required to pay the following charges to the exchange;
| Initial Processing Fee | Rs 25,000 (One-time) |
| Initial Listing Fee | Rs 50,000 or 0.01% of the IPO issue size (Whichever is higher) |
| Exchange Refundable Deposit | 1% of the IPO offer size |
Important Points
- The processing fee is payable at the time of in-principal application.
- Initial Listing fee is paid at the time of final listing application to the designated exchange.
- Bid verification fee is paid at time when the SME IPO issue opens for the public subscription.
- The issuer company has to provide a No Objection Certificate (NOC) to the relevant exchange (BSE SME and NSE Emerge) for the release of 1% of the deposit of the issue amount. The lead merchant banker has to submit a written application in the SEBI-specific format to obtain NOC.
BSE SME and NSE SME Annual Listing Fee
Annual Listing fee is a part of post-listing compliance cost. Publicly listed SMEs are required to pay annual listing fees from subsequent financial year after they get listed on the exchange.
Earlier, NSE Emerge was following a tiered fee structure based on the company’s paid-up capital but now both BSE SME and NSE SME platforms charge an annual listing fee based on market capitalization.
| Annual Listing Fee | |
|---|---|
| BSE SME | Rs 25,000 or 0.01% of market capitalization, whichever is higher |
| NSE Emerge | 0.02% of full market capitalization as on 31st March |
- To calculate the listing fee per annum, market capitalization will be taken at the share’s closing price as of 31st March or the last trading session in the financial year.
- Company’s market capitalization = post-issue number of shares * SME’s last traded price as on 31st March
3. Service fee charged by other intermediaries
Many intermediaries are involved in the SME IPO issue process and all of them charge a service fee from the company.
- Banker to the Issue
- Auditors
- Legal Advisors
- Registrar to the issue
- Company Secretary
- Market Maker
- Depositories
- Brokers
4. Miscellaneous expenditures in SME IPO
Other expenditures involved in the SME IPO issue process are;
- Underwriting expenses
- Marketing and advertising expenses and cost for roadshows
- Printing and distribution expenditures i.e., printing DRHP and RHP, filing to exchange.
- Out-of-pocket expenses on traveling, documentation or document management, communications, etc
