What is the lot size for SME IPOs and how is it determined? The Securities and Exchange Board (SEBI) has standardized the lot size for all SME IPOs on the BSE SME and NSE Emerge. SEBI has issued clear guidelines for the lot size of an SME IPO based on the IPO issue price.
What is the IPO Lot size?
The lot size in an IPO is the minimum number of shares, an investor can apply for. In an SME IPO, the issuing company, together with the lead manager, sets the offer price for the IPO and the lot size is determined based on the price set by the company. So, the minimum bid size for the IPO is at least 1 lakh.SEBI’s standardized lot sizes for SME IPOs are applicable for both BSE SME and NSE Emerge IPOs. All IPO applications and allotments are made for the minimum lot sizes or multiples of the minimum lot size. Even after listing, the SMEs are traded in the specified lot size.
SEBI’s rules for SME IPO Lot size based on Issue Price
As per SEBI’s guidelines, SME IPOs priced upto Rs 14, the lot size will be 10,000 shares, issues priced Rs 14-18, the lot size is 8,000 shares, and so on. So, the lot size will be lower at a higher IPO offer price. Let’s look at the lot size for SME IPOs at different offer prices;
| IPO Price (In Rs) | SME IPO Lot size (No. of shares) |
|---|---|
| Upto Rs 14 | 10,000 shares |
| More than Rs 14 upto 18 | 8,000 shares |
| More than Rs 18 upto 25 | 6,000 shares |
| More than Rs 25 upto 35 | 4,000 shares |
| More than Rs 35 upto 50 | 3,000 shares |
| More than Rs 50 upto 70 | 2,000 shares |
| More than Rs 70 upto 90 | 1,600 shares |
| More than Rs 90 upto 120 | 1,200 shares |
| More than Rs 120 upto 150 | 1,000 shares |
| More than Rs 120 upto 150 | 1,000 shares |
| More than Rs 150 upto 180 | 800 shares |
| More than Rs 180 upto 250 | 600 shares |
| More than Rs 250 upto 350 | 400 shares |
| More than Rs 350 upto 500 | 300 shares |
| More than Rs 500 upto 600 | 240 shares |
| More than Rs 600 upto 750 | 200 shares |
| More than Rs 750 upto 1000 | 160 shares |
| More than Rs 1000 | 100 shares |
As per the above table, the minimum number of shares an applicant can bid for SME IPO may range from 100 to 10,000 shares depending upon the set IPO issue price.
How to determine SME IPO Lot size?
In a fixed-price issue, the offer price set by the company is used to determine the lot size for the IPO. Let’s take an example of one of the most subscribed SME IPOs of 2024, Hariom Atta & Spices. It was a fixed price issue with an offer price of Rs 48/share. As the issue price was in the price range of Rs 35-50, so the lot size for the public issue was 3,000 shares.
In book-building issues where companies fix a price range, the lot size is determined by considering the upper limit or upper price of the price band. The SME IPO of Phoenix Overseas was offered at a price band of Rs 61 to Rs 64, so the upper price of Rs 64/share falls in the price band of Rs 50 to Rs 70 and the lot size is 2,000 shares.
The lot size for the SME IPO cannot be reduced even if the share price falls below the issue price. The stock exchange may review the lot size every six months with at least one month's notice.
Differences in Lot Size for SME IPO and Mainboard IPO
- In a mainboard IPO, the issuer company sets the issue price and lot size in consultation with the merchant banker, so that the minimum bid amount (price*lot size) is 15,000. However, for SME IPOs, the minimum investment amount shall not be less than Rs 1 lakh.
- The lot size for the mainboard IPO applies only to bids in the primary market. Once the company is listed on the stock exchange (BSE and NSE), the lot size will become one share. However, SME IPOs even after listing, investors can buy and sell SME shares in the secondary market only in the prescribed lot size.
- For SMEs that have migrated to the Mainboard Stock Exchange (BSE and NSE), the trading lot size will be one share.
