SME IPO Minimum lot size

The IPO lot size is the minimum order size or the minimum number of shares that an investor can apply to subscribe to an IPO. Unlike regular IPOs, SME IPOs have standardized lot sizes that depend on the IPO issue price. As per SEBI's circular dated February 2012, the market regulator has prescribed the minimum trading lot size for IPOs of small and medium enterprises that wish to list their shares on the SME platform for trading in the secondary market.

One of the major differences between SME and Mainboard IPO is the lot size. Post IPO listing, SME securities are traded in the specified lot size only, whereas in mainboard IPO, customers can purchase even 1 share or as much as they want. Thus, the SME IPO lot size remains fixed at around Rs 100,000 during pre and post-IPO securities listing assuming the share price does not fall too much.

What is the lot size in SME IPO?

In an IPO, lot size is the minimum number of shares that an investor can bid for. It is the smallest quantity of shares that can be traded in a single IPO order. In other words, it is the least quantity of shares allotment to applicants. For instance, if a SME IPO has a lot size of 2,000 shares, it means investors must apply for at least 2,000 shares or in multiples.

Unlike mainboard IPOs, SME IPOs have a higher minimum application amount or trading lot size of not less than Rs 100,000. The minimum application value here is the product of the issue price and lot size. In this regard, in 2012, SEBI specified the guidelines for lot sizes for BSE SME and NSE SME IPO based on the public offer issue price.

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?

If an emerging startup issues an IPO at a fixed price, the issue price will be considered to determine the lot size. However, in the case of a book-building IPO where the public offer issues at a price range, the lot size will be the trading lot of the price band in which the cap price or upper price falls.

For instance, if a SME proposing to list on the SME exchange makes a public offer at a fixed price of Rs 24, the minimum application trading lot will be 6,000 shares.

In another scenario, if SME’s merchant bankers decide to offer an IPO at a price band of Rs 32 - Rs 36, then the minimum trading lot for the issue will be 3,000 shares, given that the higher price of Rs 36 falls into the price range of Rs 35 - Rs 50.

The SME IPO lot size cannot be reduce even if the share trading price falls below the issue price. The stock exchange can review the lot size every six months by giving at least one month's advance notice.