Starting 1 July 2025, the SME IPO rules governing how investors participate in IPOs will undergo a major overhaul. If you’re an investor in this segment — whether a seasoned player or just getting started — these changes are crucial and could significantly affect how you approach your next bid.
The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have jointly announced a revised bidding process for SME IPOs aimed at increasing transparency, standardising procedures, and filtering out unserious bids. These SME IPO rules, while making the platform more robust, raise the entry barrier for retail investors.
📈 Record-Breaking IPO Rush Ahead of Regulation
According to IPO Central’s data, a record 30 SME companies have either launched or are set to launch their IPOs in June 2025, as of the time of writing this article, collectively aiming to raise INR 1,382.13 crore from the market. According to analysts, this surge is driven by the impending regulatory tightening.
With the new entry barrier of INR 2 lakh minimum investment and elimination of retail-friendly norms like cut-off bidding, many small and mid-sized companies are rushing to list before the July 1 deadline, to take advantage of the still-accessible retail investor base.
“Companies understand that once the new norms kick in, the pool of potential retail investors may shrink dramatically. That’s why we’re seeing a last-minute scramble,” said a senior investment banker associated with SME underwriting.
🔁 SME IPO Rules Change: Transition Timeline
SME IPO rules changes will come into full effect on 1 July 2025. For IPOs that open on or before 30 June, both the existing and new bidding systems will co-exist. In cases of spillover, the dual mechanism will be allowed until 11 July 2025. Thereafter, only the new bidding framework will apply.
🔑 Key Changes in SME IPO Bidding You Must Know
🧾 1. Redefinition of the Retail Category
The familiar ‘Retail Individual Investor’ category will be replaced with a broader label: ‘Individual Investor’. But this change is more than just semantics.
- To qualify as an Individual Investor under the new rules, you must apply for a minimum of two lots, and the application amount must exceed INR 2 lakh.
- This move essentially eliminates the earlier threshold that allowed participation with much smaller ticket sizes.
💰 2. Minimum Bid Size Increased
- Across all categories — Individual, Employee, Shareholder, and Policyholder — the minimum bid size is now set at two lots, valued above INR 2 lakh.
- For the Employee category, the bid must be between INR 2 lakh and INR 5 lakh, in multiples of the lot size.
This revision marks a shift toward attracting more serious and capital-committed investors, pushing out casual or speculative retail bids.
❌ 3. No Cut-Off Price Option
One of the most notable structural changes is the elimination of cut-off price bidding — a facility earlier used widely by retail investors to simplify participation without price prediction.
- Now, all investors must enter specific price bids. This is designed to enforce price discipline and enhance transparency in the bidding process.
🚫 4. No Bid Modifications or Cancellations
- Once a bid is submitted, it cannot be cancelled or modified downward, regardless of the investor category.
- This rule tightens investor commitment and discourages speculative or hasty bidding practices.
⏱️ 5. Revised Timelines on Final Day
- Bidding across all categories will now close at 4:00 PM (last day cut-off time).
- However, UPI mandate confirmations will be allowed until 5:00 PM, giving investors a brief buffer for completing payment authorisation.
👥 Impact on Various Investor Categories
| Category | Minimum Bid | Special Rules |
|---|---|---|
| Individual Investors | 2 lots (INR 2L+) | No cut-off bidding, no bid changes |
| Employees | 2 lots (INR 2L+) | Max limit INR 5 lakh, multiples of the lot size |
| Shareholders/Policyholders | 2 lots (INR 2L+) | No exemptions |
| QIBs & NIIs | More than 2 lots | Must adhere to lot multiples |
🔍 What It Means for Retail Investors
While the upcoming SME IPO rules change promise more transparency and stronger governance, they also make SME IPOs less accessible to small-ticket retail investors. If you’re someone who typically invests INR 1,00,000 to 1,50,000 in IPOs, your ability to participate could be curtailed starting July.
Meanwhile, companies are capitalising on the final days of relaxed norms, leading to this record IPO volume in June — a rush that reflects both opportunity and urgency.
However, the revised bidding process for SME IPOs raises the bar for participation, but they are intended to enhance the credibility of SME listings. Investors can expect better governance, higher-quality IPOs, and less volatility — albeit with higher capital commitment.
✅ Final Thoughts
If you’re currently investing — or planning to invest — in SME IPOs, it’s time to adjust your strategies. Carefully assess whether your investment appetite and capital align with the new rules. While the reforms may appear restrictive, they could ultimately benefit long-term investors by creating a cleaner, more robust SME market.
For retail participants, this also means fewer casual opportunities, but greater reward potential in well-researched SME offerings.
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