An SME IPO is a process through which small and medium-sized enterprises (SMEs) raise capital for the first time on NSE or BSE SME platform. Companies with minimum post-issue capital of Rs 1 crore and a maximum of Rs 25 crore are eligible for SME IPO in India.
The SME companies list on NSE Emerge or BSE SME platform. The SME companies use relaxed listing and disclosure requirements compared to those for larger companies.
Interested in more details on SME IPO, then check my article on “How to invest in SME IPO”.
Proceed ahead – if you are aware of the growth opportunities and challenges of investing in SME IPO. I have explained the step-wise process to sell shares that you have got in the SME IPO.
In a nutshell – SME IPO can be sold the same way as any other IPO shares are sold that is via DEMAT and Trading account or by calling your stockbroker. Direct selling of allotted shares under the SME IPO is allowed from your online trading account or your stock trading mobile app.
The order book for SME shares will look as under.
Point 1 & 3 denotes the illiquidity in SME shares trading. There are a lot of sell quotes but only 1 buy quote. At times you will not find buyers or sellers for SME IPO shares. You need to wait for the trades to get executed.
Point 2 shows the lot size restriction. You can’t sell shares individually. If you need to sell SME IPO shares, you need to sell them in the same lot as you have got.
Remember, SME IPO shares are allotted and traded, I repeat TRADED after listing in the same lot size as allotted in the IPO.
For example, if you have been allotted 1600 shares (1 lot), then you have to sell all the 1600 shares in a single sell order. You can’t sell 1000, 850, 500, hell 150 or 25, or even 1 share of an SME IPO. The whole 1600 SME IPO shares need to be sold in a single order.
The same rule applies when buying SME shares on NSE or BSE. You need to purchase 1600 shares (1 lot) in a single buy order. 1 lot of SME IPO can have 100 to 10,000 shares depending on the share price set by the SME company under the SEBI regulations and listing requirements.
Due to the lot size requirements the amount of margin requires for buying SME IPO share is around Rs. 1 Lakh to 1.5 Lakhs.
Next, you need to check the Stock Exchange.
SME IPO shares can only be sold on the exchange where the SME shares are listed. You cannot sell BSE-listed SME IPO shares on NSE and NSE Emerge-listed SME IPO shares on BSE.
SME IPO shares are listed on either the BSE SME platform or the NSE Emerge platform. The SME platform is dedicated to buying, selling and trading in SME shares and is different from the Mainboard platform.
The SME company decides the platform where it wants to list the shares.
SME IPO Shares Trading Post Listing: Key Aspects
#1. Minimum Listing Requirements
SMEs seeking to list their shares on the SME exchange platform are required to meet certain eligibility criteria, including minimum financial thresholds related to net tangible assets, track record of profitability, and post-issue capital.
You can find here the list of upcoming IPOs in 2023.
#2. Market Maker
For the first three years after listing, SME shares must have a designated market maker responsible for maintaining liquidity in the market and facilitating orderly trading.
Market makers have a specific responsibility to create a market for the shares by being both buyers and sellers.
#3. Minimum Trading Lot
There is a prescribed minimum trading lot for SME shares, which determines the minimum number of shares that can be bought or sold in a single transaction. This helps ensure wider retail participation and liquidity.
If you want to do intraday trading, I would suggest starting investing with Rs 5000 as an initial investment.
#4. Price Bands
SEBI & stock exchanges mandate a price band for trading in SME shares. The price band restricts the permissible price movement in a single trading session. This is done to prevent excessive volatility and protect investors from abrupt price fluctuations.
#5. Trading Mechanism
SME shares are traded on a separate segment of stock exchanges known as the SME exchange platform. These platforms are specifically designed for SMEs and provide a marketplace for trading their shares.
#6. Trading Hours
SME shares are traded during the regular trading hours of the stock exchange from 9:15 AM to 3:30 PM.
Check out – how to invest 10 lakhs to earn monthly income regular
How to sell SME IPO shares on Zerodha?
#1. Login to Your Zerodha Kite Account
Visit the Zerodha website and log in to your trading account using your credentials. Smartphone users will need to log in to their Kite mobile app.
You can go through our article on Zerodha charges to know about the brokerage charges with account opening fees.
#2. Select SME Shares
Once logged in, navigate to the “Holdings” Section. This is where you’ll find the list of the shares you hold. Find the SME IPO shares you want to sell in your portfolio. Click on the relevant share to proceed with the selling process.
Click the 3 dots shown beside the stock as shown by the red arrow. I have shown for ITC shares but you will find the 3 dots for all the shares including SME IPO shares
A dropdown list will pop up when you click the 3 dots.
Select “Exit” to sell SME shares and the sell order form pop-ups as shown below.
- Check the stock exchange (BSE or NSE).
- Check the quantity that you want to sell. By default, it will be 1 lot. You can increase the lot but can’t reduce the number of shares below the lot size.
- As the market is illiquid, the system will prompt to specify the limit price.
Click on the sell tab to place the sell order.
Check out – Angel One vs Zerodha
#3. Review and Confirm
Double-check the order details to ensure accuracy. Once you’re satisfied, review the order and click the “Sell” button to confirm.
#4. Order Execution and Fund Settlement
After placing the sell order, monitor the status of your order. You can usually find this information in the “Orders” or “Order Book” section of the platform.
This may take time. Can’t say how much because SME trading is illiquid and finding a buyer or seller is hard.
But once the sell order is executed, the funds from the sale will be credited to your trading account.
You would like to read – best forex trading apps in India
Key Takeaways
SME IPO shares need to be sold in specific lot sizes or multiples of lots. The minimum is 1 lot. You can’t sell an odd number of shares.
You can sell only on the exchange where the particular SME shares are listed. For example, you can’t sell shares listed on the BSE exchange on NSE, or shares listed on the NSE exchange on BSE. Also remember, you will need patience because of market illiquidity.
FAQs
You will receive SME IPO shares in your demat & trading account opened with any one of the stock brokers that you have mentioned in the SME IPO application.
Yes, you can sell SME IPO shares on any of the above-mentioned stock brokers. They all provide a trading platform that allows you to buy and sell shares, including those acquired through SME IPOs.
When placing a sell order you’ll need to specify details such as the quantity of shares you want to sell, the order type (market or limit), and the price at which you want to sell (if using a limit order).
Yes, you can choose between a market order and a limit order. A market order is executed at the prevailing market price, while a limit order allows you to specify a price at which you’re willing to sell.
Due to illiquidity, the system will prompt for limit orders.
The settlement process for the sale of shares happens the next day. The funds from the sale will be credited to your trading account upon successful settlement the next day.
Yes, there may be brokerage charges and other transaction-related fees associated with selling shares.
This will depend on your stockbroker. You can find detailed information about these charges on your stock broker’s official website.
The minimum quantity of shares you can sell is 1 lot.
Sell orders can be placed during trading hours as specified by the stock exchange which is from 9:15 AM to 3:30 PM.
After listing the SME IPO shares can be sold in the same way as any other shares. The process is explained above in the article.
You can sell SME IPO shares once they are listed and start trading on the stock exchange. The exact timing of when you can sell your SME IPO shares depends on the trading hours of the stock exchange which is from 9:15 AM to 3:30 PM.
