India’s capital markets have evolved dramatically in the last two decades. While large corporations have long dominated the IPO landscape, Small and Medium Enterprises (SMEs) are now stepping into the spotlight through dedicated SME IPO platforms on BSE and NSE. These listings offer smaller businesses the chance to raise capital, enhance visibility, and accelerate growth.
But the journey to an IPO isn’t simple. From drafting financial documents to ensuring regulatory compliance, the process demands technical precision and strategic foresight. This is where Chartered Accountants (CAs) play a pivotal role.
CAs are not only accountants; they are strategic partners, compliance guardians, and valuation experts. For SMEs, they serve as the bridge between entrepreneurial ambition and regulatory approval. In this comprehensive guide, we’ll explore how Chartered Accountants shape the success of SME IPOs in India.
Section 1: Understanding SME IPOs in India
What is an SME IPO?
An SME IPO allows small and medium businesses to list their shares on specialized SME platforms of BSE and NSE. These platforms are designed for companies with lower post-issue capital requirements compared to mainboard IPOs.
NSE Emerge and BSE SME are the two dedicated platforms.
Entry barriers are relaxed to accommodate businesses with smaller scale operations.
It provides liquidity, visibility, and credibility to SMEs.
Eligibility Criteria for SME IPOs
Typical requirements include:
Net tangible assets of at least ₹1.5 crores.
Positive cash accruals in at least 2 of the last 3 years.
Post-issue paid-up capital between ₹1 crore and ₹25 crores.
These parameters make SME IPOs accessible to ambitious businesses across India.
Section 2: Why Do SMEs Opt for IPOs?
1. Capital for Growth
The most obvious reason is raising funds. SMEs often require fresh capital to expand operations, invest in technology, repay debt, or enter new markets.
2. Enhanced Visibility
Being a publicly listed company boosts brand reputation and builds customer trust.
3. Investor Confidence
Institutional investors and HNIs prefer investing in regulated, listed entities, as they inspire confidence.
4. Long-Term Sustainability
Listing often transforms business governance, paving the way for sustainable growth.
5. Valuation Multiples
Listed companies enjoy better valuations compared to private firms.
Section 3: Role of Chartered Accountants in SME IPOs
Chartered Accountants are at the heart of every SME IPO. Their role is not limited to numbers but extends to strategy, compliance, and investor communication.
Pre-IPO Stage
Financial Readiness Assessment
Review books of accounts.
Ensure proper accounting standards.
Identify risks and weaknesses.
Tax and Corporate Structuring
Design tax-efficient models.
Reorganize ownership patterns if required.
Guide promoters on regulatory hurdles.
Due Diligence Support
Verification of assets and liabilities.
Cross-checking contracts, licenses, and litigations.
IPO Execution Stage
Drafting Financial Sections of DRHP
Prepare historical financial statements.
Ensure compliance with SEBI requirements.
Valuation & Pricing Strategy
CAs build valuation models (DCF, comparable multiples, NAV).
Help merchant bankers arrive at a fair issue price.
Liaising with Regulators & Stakeholders
Coordinate with SEBI, exchanges, lawyers, and auditors.
Maintain transparent communication with investors.
Post-IPO Stage
Compliance & Reporting
Continuous disclosure of quarterly results.
Adherence to corporate governance norms.
Investor Relations
Help management communicate with shareholders.
Build credibility with timely disclosures.
Strategic Advisory
Guide SMEs on mergers, acquisitions, or secondary fund raises.
Section 4: Case Studies & Examples
Case Study 1: Manufacturing SME Listing
A Pune-based engineering SME raised ₹30 crores via BSE SME IPO. The CA-led advisory team helped restructure debt, improve disclosures, and build a compelling valuation story. The IPO was oversubscribed 5x, largely because of transparent financials and strong investor communication.
Case Study 2: Tech Startup on NSE Emerge
A mid-sized IT services company wanted to scale globally. Their CA advisor ensured regulatory compliance, optimized tax liabilities, and worked on equity dilution strategy. The IPO not only raised ₹20 crores but also attracted venture capital interest.
These examples highlight how the right advisory team, especially skilled CAs, can transform IPO outcomes.
Section 5: Benefits of Having a CA as IPO Advisor
Regulatory Shield – Ensures full SEBI compliance.
Valuation Integrity – Builds investor confidence.
Financial Transparency – Increases chances of oversubscription.
Risk Mitigation – Identifies and addresses legal/financial risks early.
Post-Listing Guidance – Sustains investor trust long after IPO.
Section 6: Common Challenges Faced by SMEs in IPOs
Incomplete Financial Records – Many SMEs lack structured accounts.
Weak Governance Structures – Promoter-driven businesses struggle with transparency.
Regulatory Hurdles – Compliances with SEBI and exchanges can be overwhelming.
Investor Skepticism – Retail investors are cautious of small company IPOs.
High Costs – IPO advisory, legal, and listing costs may seem heavy for SMEs.
How CAs Solve These Challenges
Streamline records.
Build governance structures.
Create investor-friendly disclosures.
Optimize costs with efficient planning.
Section 7: FAQs About SME IPOs
Q1. Is GMP (Grey Market Premium) important for SME IPOs?
It gives a sentiment but should not be the only investment decision factor.
Q2. Can every SME apply for an IPO?
No. Only those meeting SEBI and exchange criteria can.
Q3. What role does a CA play compared to a Merchant Banker?
Merchant bankers handle marketing and issue management, while CAs ensure financial, tax, and compliance accuracy. Both work together.
Q4. Is SME IPO risky?
Yes, like any equity investment, SME IPOs carry risk. But proper financial disclosures reduce risk.
Section 8: Future of SME IPOs in India
The SME IPO market in India is projected to grow significantly in the next 5 years due to:
Government incentives for MSMEs.
Growing appetite from retail investors.
Better investor education.
Digital platforms enabling wider participation.
Chartered Accountants will continue to be central players in this growth story, guiding SMEs to unlock capital markets with credibility and compliance.
Conclusion
An SME IPO is not just about raising money—it’s about transforming a private business into a transparent, investor-friendly enterprise. The process requires meticulous planning, robust compliance, and credible financial storytelling.
Chartered Accountants bring all these elements together. From ensuring regulatory compliance to building valuation models and guiding post-listing obligations, they are the backbone of successful SME IPOs in India.
For SMEs aspiring to go public, choosing the right CA advisor is not just a step—it’s the foundation for long-term success.