An SME IPO (Small and Medium Enterprise Initial Public Offering) is a fundraising process designed specifically for smaller, high-growth companies that want to go public but do not yet meet the massive financial and regulatory requirements of the Mainboard. These companies list their shares on dedicated platforms—specifically NSE Emerge or BSE SME—rather than the main exchange. Because these firms are in their early expansion stages, SEBI provides "relaxed" norms, such as allowing them to report financial results half-yearly instead of quarterly and requiring less rigorous vetting of their offer documents. The primary goal of an SME IPO is to give these "backbone" businesses access to public capital for expansion, debt repayment, or working capital without the heavy compliance burden faced by corporate giants.

From an investor's perspective, SME IPOs are quite different from regular ones. To ensure that only "serious" investors with a high risk appetite participate, the minimum investment is much higher—typically ₹1 lakh to ₹2 lakh per lot, compared to the ₹15,000 required for Mainboard IPOs. Additionally, SME shares must be traded in "lots" even after they list; you cannot buy or sell a single share, which can lead to lower liquidity. While SME IPOs offer the potential for massive "multibagger" returns if the company grows into a market leader, they also carry significantly higher risk due to the smaller scale of the business and higher price volatility.