Minding the retailer interest : New SEBI guidelines for SME ipo.

Any growing economy heavenly relies on the small scale industries to cater the need of large scale industry. The growth of SME sector plays a pivotal role in the economy development. Cashing on the oppurtunity, sometimes investing on the SME sector is quite beneficial. Especially when the economy is in developing phase. Our eceonomy is a great example and I manage to get good return by applying on the SME IPO. Last few years, I made some handsome return by investing on SME sector, but the recent amendment introduced by SEBI (Securities and Exchange Board of India) is pulling down the curtains for me.

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Till now a person typically needed Rs. 1 Lakh to invest in one lot size for SME IPOs (Initial Public Offerings). This means investors can only apply for and receive allotments in multiples of the defined lot size, which is set by the company and stock exchanges. The specific lot size can vary, but it generally ranges from 100 to 10,000 shares and is designed to be within the Rs.1 lakh to Rs.2 lakh range. The company issuing the IPO and regulatory authorities determine the lot size based on factors like trading activity and market conditions.

It was a good bet for me to try my luck by applying any specific SME IPO and there by getting good return on allotments. I did manage to stay lucky on numerous ocassion as a retail investor. I was taking a risk of blocking a good amount of money for a single lot of shares. On successfully allotments in did manage to book 30% to 50% of profits in a single allotments. But now, minimum amount has been i creased by SEBI. New rules have been implemented from 01-July-2025. that has increased the minimum application size to two lots, valued over Rs.2 lakh. So now a retail investor like me need more fun to apply for double lot of shares offered. The minimum amount of share application has been inreased and so does the amount. Noone can able to apply for a single lot of shares.

Over the past few years, there's been a significant rise in retail investor participation in SME IPOs. Investment on this sector tend to carry higher risks, and increased investor participation that can lead to greater exposure and potential losses if market sentiments change after listing. The doubling of the SME IPO lot size is a regulatory measure designed to make the investment process more selective and potentially reduce the number of smaller, less informed investors participating in these higher-risk IPOs.

I am not sure, how effective this measure could be, but such measure reduces scope of many retail investors like me. Risking a lessor amount for few days and generating good return is very rare. But now the changes may stop many investor to even think of applying in these IPO. Risking double the amount of actual size is not bearable for investor, thereby they to would remain away from investment zone.

In good faith - Peace!!