SME IPO: NSE, BSE issue new bidding process; increased minimum bid size, revised timing, among key changes

The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have announced an overhaul in the bidding process for Small and Medium Enterprises (SME) initial public offerings (IPOs). The new process, aimed at standardizing and streamlining SME IPO participation, will come into effect from July 1, 2025.

As per the circulars issued by the stock exchanges, both the current and the new processes will remain operational for all SME IPOs opening on or before June 30, 2025. In case of spillover, the dual system will be permitted until July 11, 2025. Thereafter, the new bidding mechanism will be mandatorily applicable to all SME IPOs.

Here are the key changes under the new process for the SME IPOs:

1. New Definition for Individual Investors

The ‘Retail Individual Investor’ category has been replaced with ‘Individual Investor’. Under the new definition, an Individual Investor is one who applies for a minimum of two lots with a minimum application size of above ₹2 lakh.

2. Minimum Bid Size Enhanced

The minimum bid size for Individual Investors has been fixed at two lots, and the application amount must exceed ₹2 lakh, marking a notable increase from earlier thresholds aimed at smaller investors.

3. Cut-off Price Bidding Removed

Under the revised framework, bidding at the cut-off price will no longer be permitted for any investor category.

4. No Downward Modification or Cancellations

Investors across categories will not be allowed to modify their bids downward or cancel them once submitted, the circulars issued by BSE and NSE said.

5. Revised Timings on Final Day of Bidding

On the last day of the bidding process, bidding across all categories will close at 4:00 PM. However, UPI mandate confirmation or acceptance will be available up to 5:00 PM.

6. Provisions for Reserved Categories

Employee Category: Must bid for a minimum of two lots with an application amount above ₹2 lakh. Applications must be in multiples of lot size and cannot exceed ₹5 lakh.

Shareholder and Policyholder Categories: Also required to apply for at least two lots, with the minimum investment exceeding ₹2 lakh.

Institutional Investors: Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs) must also place bids for more than two lots.

Tarun Singh, Managing Director and Founder of Highbrow Securities, said the new SME IPO norms represent a clear shift in regulatory intent.

“SEBI’s latest revision of SME IPO norms is a structural and strategic step moving beyond the status quo. The revised lot sizes and ₹2 lakh minimum application amount across categories filter out noise and ensure only committed investors step in. By scrapping the cut-off price mechanism and disallowing bid cancellations or downward revisions, SEBI is introducing much-needed price discipline. Tighter UPI timelines, standardised bidding rules, and the removal of leniencies for certain investor categories point to a serious upgrade in how SME IPOs are expected to function,” Singh said.

According to him, this is SEBI signalling that the SME platform is no longer a regulatory sandbox; it’s evolving, and it’s going to be held to higher standards.

“The days of relaxed rules for SME listings are over; SEBI is aiming for greater transparency, better quality companies, and stronger investor trust,” he added.

Transition Timeline

The new process will co-exist with the existing SME IPO bidding mechanism until June 30, 2025. For issues that open before this date and spill over beyond it, the dual system will be extended up to July 11, 2025. Thereafter, the existing process will be discontinued.

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