SME IPO Consultant
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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:
- Size of the issue
- Number and type of intermediaries involved
- Listing exchange (NSE Emerge or BSE SME)
- Level of marketing and PR
- Need for underwriting or market making
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) |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Exchange Initial Processing Fees |
Paid to NSE/BSE for IPO application processing |
NSE: ₹25,000
|
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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) |
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|
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 |
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|
ROC Filing Fee |
For filing the prospectus and other forms |
₹5,000 – ₹25,000 |
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Stamp Duty |
On allotment of shares |
Variable by state, generally < 0.1% |
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|
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 |
|
Ensures regulatory compliance |
₹1 – ₹3 lakhs |
|
|
Bankers to Issue |
Handle application money and refunds |
Mostly nominal around 0.1% of issue size |
|
Routes UPI applications |
~Rs.10 per retail application |
|
|
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.
SME IPO Consultant
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.