If you have been following the Indian stock market recently, you have probably noticed one clear trend. IPOs are everywhere. More importantly, SME IPOs are grabbing headlines with eye-catching listing gains that often look far more attractive than mainboard IPOs. It is easy to feel that SME IPOs offer faster money and higher returns.
But the reality is more nuanced.
While some SME IPOs deliver strong listing gains, others struggle with liquidity, governance, and long-term performance. Mainboard IPOs, on the other hand, may look less exciting on listing day but often provide more stability and transparency over time.
This article helps you cut through the noise. You will understand how SME IPOs and mainboard IPOs differ, where the risks lie, and how returns play out beyond listing day.
What Is an IPO?
An Initial Public Offering, or IPO, is the process through which a private company offers its shares to the public for the first time. By doing this, the company raises capital for growth, expansion, or debt reduction, while investors get an opportunity to own a part of the business.
As an investor, you are essentially betting on the company’s future performance based on its financials, management quality, and industry outlook.
Overview of the Indian IPO Ecosystem
India’s IPO market is regulated by the Securities and Exchange Board of India, which sets rules for disclosures, pricing, and investor protection. IPOs are listed on exchanges such as the National Stock Exchange of India and the Bombay Stock Exchange.
Over the last few years, India has seen a sharp rise in IPO activity. According to data, 268 SME IPOs were launched in FY 2025, compared to fewer than 50 five years earlier.
IPO Segments in India
India has two distinct IPO segments with their individual eligibility criteria. SME IPOs are designed for smaller companies with lower capital requirements. Mainboard IPOs are meant for larger, more established businesses with stronger compliance and disclosure norms.
Understanding which segment you are investing in is critical because the risk and return profile changes significantly.
What Are SME IPOs?
SME IPOs allow small and medium enterprises to raise capital from the public. These companies typically have lower revenues, limited operating history, and are often heavily dependent on promoters.
The SME platform was created to support growing businesses, but it comes with relaxed regulations. While this helps companies list faster, it also means fewer disclosures and weaker institutional scrutiny.
Most SME IPOs have large lot sizes and are accessible primarily to high-risk retail investors. Liquidity after listing is often thin, which can make exits difficult.
What Are Mainboard IPOs?
Mainboard IPOs are issued by larger companies with stronger financials and longer operating histories. These IPOs must meet strict eligibility norms related to profitability, net worth, and governance.
Institutional investors play a major role in mainboard IPOs, which improves price discovery and post-listing liquidity. While listing gains may be moderate, long-term performance tends to be more predictable.
In FY 2023, mainboard IPOs accounted for nearly ₹55,000 crore in capital raised, highlighting their scale and institutional interest.
Key Differences Between SME IPOs and Mainboard IPOs
| Factor | SME IPOs | Mainboard IPOs |
| Company size | Small and emerging businesses | Large and established companies |
| Issue size | Typically, under ₹25 crore | Often ₹500 crore and above |
| Liquidity | Low and inconsistent | High and stable |
| High and stable | Relaxed disclosures | Strict compliance norms |
| Institutional participation | Minimal or none | Strong presence |
| Volatility | Extremely high | Moderate |
| Price discovery | Retail driven | Institution led |
| Risk level | Very high | Medium |
Return Potential: SME IPOs vs Mainboard IPOs
SME IPOs often show higher listing gains, but long-term performance is mixed. Many underperform or become illiquid over time. Survivorship bias makes returns look better than they really are.
Mainboard IPOs tend to deliver steadier returns. While initial gains may be smaller, long-term investors benefit from business growth, dividends, and liquidity.
Which Type of IPO Is Right for You?
If you have a high-risk appetite and are comfortable with limited exposure, SME IPOs can be tactical opportunities. However, they should never form a large part of your portfolio.
Mainboard IPOs suit investors looking for stability, transparency, and long-term wealth creation. A balanced portfolio usually favors mainboard exposure with selective SME participation.
Conclusion
IPO investing is not about chasing the biggest listing gains. It is about understanding risk, liquidity, and long-term fundamentals. SME IPOs and mainboard IPOs serve very different purposes and treating them the same can be costly.
This is where professional guidance helps.
Steptrade Capital helps investors evaluate IPOs with a risk-first mindset. From analyzing fundamentals to understanding liquidity and portfolio impact, their advisory approach focuses on informed decision-making rather than speculation.
Contact Steptrade Capital today for a personalized IPO consultation and make informed decisions with clarity and discipline.
Frequently Asked Questions (FAQs)
1. Are SME IPOs riskier than mainboard IPOs?
Yes. SME IPOs involve higher business, liquidity, and governance risks.
2. Why do SME IPOs show high listing gains?
Lower issue sizes and retail-driven demand often create artificial scarcity.
3. Are mainboard IPOs safer investments?
They are relatively safer due to stronger disclosures and liquidity but still carry market risk.
4. Should retail investors invest in IPOs?
Yes, but only after understanding risk, valuation, and portfolio allocation.
