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SME IPO Expenses

The cost of SME IPO ranges from 50 lakhs to a few crores, depending on the size of the issue and the services used by the issuing company.

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SME IPO

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Content:

  1. Overview of IPO Costs
  2. Broad Classification of IPO Charges
  3. Funding the IPO Costs
  4. Negotiation Tips for Promoters

All companies planning to raise capital from the public must also consider the various costs involved in the IPO process. These expenses can significantly impact cash flow and ROI, especially for SMEs, where cost control is crucial.

This chapter breaks down the IPO expenses and explains how costs are structured, and highlights critical financial commitments at each stage of the IPO process.

Overview of IPO Costs

SME IPO costs generally range from ₹50 lakhs to a few crores , depending on:

Broad Classification of IPO Charges

From a promoter’s perspective, the charges associated with an SME IPO can be broadly categorized into:

Regulatory and Statutory Charges

These are non-negotiable costs paid to regulatory authorities and stock exchanges:

Charge

Description

Estimated Range (INR)

Exchange Initial Processing Fees

Paid to NSE/BSE for IPO application processing

NSE: ₹25,000

Issue Size (Rs)

Fees (Rs)

Upto 5 crores

1,00,000

> 5 crores — 25 crores

3,00,000

> 25 crores — 50 crores

5,00,000

> 50 crores

5,00,000 +0.05% of the issue size exceeding ₹50 Cr

Initial Listing Fees

Paid to BSE /NSE at the time of final listing

BSE: ₹50,000

NSE: ₹50,000 Or 0.01% of Issue Size (Whichever is Maximum)

Annual Fees

Paid to BSE/NSE annually for listing (Applicable from subsequent financial year post listing)

BSE: ₹25,000 or 0.01% of full market capitalization (as of 31 st March), whichever is higher.

NSE: 0.02% of the full market capitalization as on March 31

ROC Filing Fee

For filing the prospectus and other forms

₹5,000 – ₹25,000

Stamp Duty

On allotment of shares

Variable by state, generally < 0.1%

Bid verification charges

Paid on issue opening date

0.01% of the issue size, subject to a minimum of ₹25,000 and a maximum of ₹50,00,000.

2. Intermediary and Professional Fees

These are the most significant expenses and vary widely depending on issue size and complexity.

Intermediary

Role

Fees (Indicative Range)

Merchant Banker(s)

Lead managers of the IPO – operational purposes (DRHP preparation etc.)

₹25 – ₹30 lakhs

Merchant Banker(s)

Selling commission, Underwriting Fees, Success Fees

~6%-12% of the IPO size, paid from the proceeds of the IPO post successful IPO closure.

Registrar to Issue

Manages share allotment and records (based on application size, OFS etc.)

₹5 – ₹10 lakhs

Legal Advisor

Drafting offer documents, legal compliance and legal due diligence

₹2 – ₹5 lakhs

Auditor

Certifies financials and issues certificates

₹2 – ₹5 lakhs

Peer Review Auditor

Required under SEBI regulations

₹1 – ₹3 lakhs

Company Secretary

Ensures regulatory compliance

₹1 – ₹3 lakhs

Bankers to Issue

Handle application money and refunds

Mostly nominal around 0.1% of issue size

Sponsor bank

Routes UPI applications

~Rs.10 per retail application

Market Maker

Ensures post-listing liquidity

Commitment fee + spread cost (~₹5–₹15 lakhs for 3 years)

Underwriting

Undertake the role to purchase in case of undersubscription (if applicable)

1% - 2% of issue size

IPO Advisory/Consultant

Helps navigate the IPO process

0.5% to 1% of issue size

3. Marketing and Roadshow Expenses

Creating awareness among investors is critical for a successful subscription.

Component

Description

Estimated Cost

IPO Branding

Advertisements, IPO notes, press releases, printing

₹2 – ₹5 lakhs

Investor Meetings / Roadshows

Travel, presentation kits, event costs

₹2 – ₹5 lakhs

PR Agency (optional)

Enhancing public visibility

₹2 – ₹5 lakhs

4. Technology and Platform Charges

Technology-related expenses may include:

  • Website upgrade (mandatory under SEBI norms): ₹25,000 – ₹1,00,000
  • Digital IPO platform costs (if used): ₹50,000 – ₹2,00,000 (depending on provider)

5. Post-Issue Compliance and Hidden Costs

Once listed, a company must comply with continuous obligations.

Component

Frequency

Estimated Annual Cost

Compliance filings

Quarterly, Half-Yearly, annually

₹2 – ₹5 lakhs/year

Annual Listing Fee (Stock Exchange)

Yearly

₹50,000 – ₹2 lakhs

Market Maker Renewal

Post 3 years

₹5 – ₹15 lakhs (negotiable)

Investor Grievance Redressal

May need external helpdesk

₹25,000 – ₹1 lakh/year

Funding the IPO Costs

  • Promoter Contribution : Usually, costs are borne upfront by the company, effectively by the promoters.
  • IPO Proceeds Reimbursement : Many expenses can be reimbursed from IPO proceeds (if declared in the RHP).
  • Bridge Financing : Some promoters take short-term loans to fund IPO expenses, repaid post-issue.

Negotiation Tips for Promoters

  • Bundle Services : Some merchant bankers offer package deals that include registrar, legal, and market maker.
  • Choose Merchant Banker Carefully : Fee is negotiable based on issue size and past relationships.
  • Clarity in Engagement Letters : Always get a breakup of professional fees and success-based components.
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Key Takeaways

The SME IPO journey is capital-intensive, but with proper planning, the cost burden can be managed efficiently. For promoters, transparency, budgeting, and strategic negotiation are key to ensuring a high return on the investment made for the IPO process.

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Frequently Asked Questions

An SME IPO typically costs between ₹50 lakhs to a few crores, depending on issue size, exchange (NSE/BSE), number of intermediaries, marketing spends, and whether underwriting or market making is required.

 

Discuss this question

SME IPO cost between Rs 50 lakhs and a few crores.

The typical cost structure to raise capital through an SME IPO is:

  • Merchant Banker Fees: ~₹25–30 lakhs (for IPO management, DRHP preparation, etc.)
  • Other Mandatory Professional Fees (registrar, auditors, legal advisors, compliance, sponsor bank, etc.): ~₹10–15 lakhs
  • Exchange-Related Fees (processing, initial listing, refundable deposits, bid verification charges, etc.): Varies, usually a few lakhs depending on exchange rules
  • Marketing & PR: Additional, ₹2–10 lakhs depending on the campaign

In addition to these one-time IPO costs, promoters must also budget for recurring expenses, such as:

  • Annual Listing Fees: ₹25,000 (BSE) or 0.01% of market cap / 0.02% (NSE), depending on exchange
  • Market-Making Commitment: Mandatory for 3 years, ~₹5–15 lakhs (negotiable)
  • Post-Listing Compliance Costs: ~₹2–5 lakhs per year for filings, audits, and investor communication
SEBI

 

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IPO costs can be divided into three broad categories:

  1. Regulatory & Statutory Charges (exchange fees, SEBI/ROC filing, stamp duty)
  2. Intermediary & Professional Fees (merchant banker, registrar, legal, auditors, CS, market maker, sponsor bank, etc.)
  3. Miscellaneous Costs (marketing, PR, technology upgrades, roadshows, out-of-pocket expenses)

 

Discuss this question

Yes, SEBI requires issuers to maintain a functional website with investor information. Costs may include:

  • Website upgrade: ₹25,000 - ₹1,00,000
  • Digital IPO platforms: ₹50,000 - ₹2,00,000

 

Discuss this question

Promoters can manage and reduce SME IPO costs by planning strategically and making smart choices in selecting intermediaries and services:

  • Bundle services (merchant banker + registrar + market maker)
  • Negotiate fees based on issue size and complexity
  • Minimize optional marketing expenses if not essential
  • Avoid frequent structural changes (like authorized capital increases) before filing

 

Discuss this question