Knowledge Centre
What we know about narrowing the gap, written down.
The questions promoters ask before they decide, answered in plain words. Each answer shows how the process works, then what is in your hands, so you can start narrowing the gap yourself.
General information, not legal or investment advice. Rules as at 2 November 2026. Proposals are marked as proposals.
A
Before you start
Is this the right time, and the right route?
Every valuation begins long before anyone names a number. These questions decide when the work should start. The earlier it starts, the more choices stay in your hands.
10 questions
Is my company actually suitable for an IPO?
There are two tests. The first is the rules. Today an SME IPO needs operating profit (EBITDA) of at least Rs 1 crore in two of the last three financial years. Paid-up capital after the issue must be up to Rs 25 crore. Each exchange also sets conditions on track record, net worth and cash flows.
And the market: a growth story investors can believe, consistent profitability, and a willingness to run the company with listed-company governance and disclosure.
What is the right time for me to raise funds?
Usually when the numbers are strong and still rising, the records are in order, and the company has a clear use for the money. Raising when you do not urgently need capital gives you time and room to negotiate.
Eligibility rules matter too, and they can change.
SEBI has proposed raising the SME eligibility bar to an average operating profit of Rs 3 crore a year over three years, from Rs 1 crore in two of the last three years today.
Why raise money through an IPO instead of a loan?
A loan must be repaid with interest, usually needs collateral and personal guarantees, and limits how much more you can borrow. Money raised in an IPO is equity: there is no EMI and no repayment date.
In return, you share ownership and take on listed-company duties, and the share price can rise or fall. Many companies use both.
How should I prepare before meeting a merchant banker, and what should I ask?
In the first meetings, a merchant banker is reading the company: three years of accounts, the shareholding and its history, borrowings, related-party dealings, pending cases, and the numbers that describe the business. Where these are in order, the talk moves quickly to the issue itself.
You choose which meeting you walk into. Arrive able to state your revenue, margins, customer concentration and growth without notes, and ask who will work on your file day to day, what is needed by when, and how long it will realistically take from today.
What is the difference between the SME platform and the Main Board?
SME platforms, such as BSE SME and NSE Emerge, are for companies whose paid-up capital after the issue is up to Rs 25 crore. They have their own eligibility tests, the issue is fully underwritten, and a market maker must quote prices for at least three years after listing.
The Main Board is for larger companies, with its own conditions. Some companies list on an SME platform first and move to the Main Board once they meet its conditions.
Can a company of my size raise money through an SME IPO?
Many SME IPOs are modest in size. On NSE Emerge, the average issue in April to September 2026 was about Rs 59 crore, and many issues are smaller. What matters more than size is whether the company meets the eligibility tests and how clearly its numbers and business are explained.
NSE Market Pulse, October 2026.
My operating profit is below the SME test today. Is there any point talking?
Yes. Accurate books, a clear structure and reliable numbers take time to build, and they help in discussions with banks and investors in the meantime. An IPO can be considered once the company meets the eligibility conditions.
On the Main Board, a company that does not meet the profit test can already list under Regulation 6(2) of the ICDR Regulations, with at least 75% of the issue allotted to qualified institutional buyers. SEBI has proposed a similar route for SME issues.
What if a bank loan or private equity suits us better?
That can be the right choice. The same preparation (accurate books, a clear structure and restated numbers) can help in discussions with banks and investors too.
The factory land is in my father's name. Is that a problem?Family
It is common, and it can be dealt with. The company needs secure, documented use of the land it depends on: usually a registered long-term lease at a fair rent, or a transfer to the company.
Which is better depends on tax and family considerations, and is worked out with your CA and legal counsel.
Some of our loans are from relatives. What happens to them?Family
They are shown in the accounts and, where the relatives are related parties, disclosed. In an SME IPO, the money raised cannot be used to repay loans from promoters, the promoter group or related parties.
So these loans are usually settled or converted from the company's own resources, with the right approvals, well before filing.
B
Valuation
What decides the number, and what you control.
You do not decide the valuation. You decide the evidence. Here is how an investor arrives at a number, and which of your records it rests on.
7 questions
How is valuation calculated?
Investors usually compare a profitable company with similar listed companies. They look at how many times its yearly profit the market pays for those companies. This is the price to earnings, or P/E, multiple. Some use operating profit instead (EV to EBITDA). That figure is then weighed against the company's own growth, margins, return on capital and risks.
The method is the same for everyone. What goes into it is not: how steady, how protected from competitors and how easy to grow the business looks, and how well each of those is shown.
Who actually decides my valuation?
In a book-built issue (where investors bid for shares within a price range), the company and its merchant banker set a price band; investors bid within it, and the company and merchant banker then fix the final price on the basis of the bids. In a fixed-price issue, the price is set in advance.
SEBI and the exchange review the disclosures. They do not decide, approve or guarantee the price.
The company and its merchant banker fix the price, guided by the bids. What investors read before they bid is yours to prepare.
Why did a similar company get a different valuation from mine?
Two companies with the same revenue can look very different to an investor. The difference lies in how concentrated their customers are and how much revenue repeats. It also lies in how protected their margins are, how strong their governance is, and how easy the business is to grow.
How clearly each of these is shown, with evidence, matters as much as the facts themselves.
How the investor reads each difference:
- A few large customers. An investor sees risk, until the years and contracts behind them are shown.
- Repeat orders. Orders that return are paid for. Orders won afresh are marked down.
- Governance. What cannot be verified is priced as risk, across every number in the document.
- Barriers to entry. Anyone can enter some businesses tomorrow. Almost nobody can enter others.
- What only you do. An advantage never stated is never paid for.
- Scalability. Capital that multiplies, or capital that merely replicates.
What if I believe my company is worth Rs 500 crore and someone says Rs 300 crore?
Both numbers can be honestly held. Each comes from a method, usually a multiple of earnings compared with similar listed companies, and from assumptions: which year's earnings, which peers, how much growth and how much risk.
Arguing about the answer rarely moves it. Ask which assumption differs and what evidence would change it, then build that evidence. No one can promise the final price; it is set at the issue. What you can build is the evidence behind yours.
How reliable is an early estimate of valuation?
Any figure mentioned before the numbers are restated, the key numbers are documented and the market has seen the company is a starting point, not a price.
The price is set close to the issue, by the company with its merchant banker, on market conditions, peer valuations and investor demand at that time. It helps to know what any early number assumes.
Why might an outsider value my company lower than I do?
The gap is usually between what the promoter knows about the business and what an outsider can see and check. Customer loyalty, pricing power and future orders are real, but an investor can only weigh what is shown.
Two things help an outsider see more of the business: showing more of what is already true, with data and documents, and building what is missing before going to market. Neither guarantees any particular valuation. The price is set at the time of the issue.
Why do key numbers matter so much?
Key numbers, or key performance indicators (KPIs), are the measures an investor uses to judge the business: customer count, repeat rate, capacity use, margin per unit and so on.
Offer documents disclose them in the section on the basis for the issue price. They are approved by the company's audit committee and certified by its statutory auditor or a peer-reviewed chartered accountant. Any key numbers shared with investors before the IPO must be disclosed too, and after listing the company keeps reporting them for a period.
Key numbers that are defined, tracked and evidenced early tell the business's story. Gaps leave investors to guess.
C
The people in the process
Who does what, and who sits on your side.
Many hands touch an IPO, and each has a defined role. Only one brings your company's case: you.
9 questions
Merchant bankers are already approaching me. Why would I need anyone else on my side?
A merchant banker is appointed by the company to manage the issue. Its role also includes due diligence on what the company says, and a certificate to SEBI or the exchange that it has been checked, so it must test the company's case as well as present it. That is the system working as designed.
The case it tests is yours to build: the data, the KPIs and the story, ready before the file is opened. A preparation firm on the company's side builds it with you, alongside your merchant banker and never in place of one.
The IPO ecosystem: who does what?
The company decides whether to list, when and how much to raise, with its board and shareholders, and the company, its directors and its promoters stand behind every line of the offer document. The SEBI-registered merchant banker manages the issue. Auditors examine the restated accounts, legal counsel carries out legal due diligence, and the registrar, the underwriter and, for SME issues, the market maker each have a defined role.
The exchange reviews the draft, and for a Main Board issue so does SEBI. Investors decide whether to apply, and in a book built issue, at what price within the band.
Each one has a mandate. Only one is yours: the company, and the case it brings to all of them.
What does the merchant banker do?
The merchant banker manages the issue. It carries out due diligence, drafts and files the offer document, coordinates the other intermediaries, takes the issue to investors and gives a due diligence certificate to SEBI or the exchange.
The company, its directors and its promoters remain responsible for what the offer document says.
What do SEBI and the exchange do?
SEBI makes the rules and reviews offer documents for Main Board issues. For SME issues, the stock exchange reviews the draft offer document. Both raise queries and give observations or approval, and the exchange grants listing.
Neither decides the price, and neither endorses the company.
Who actually invests in an SME IPO?
Qualified institutional buyers such as mutual funds and insurers, non-institutional investors such as high net worth individuals and family offices, and individual investors. In SME issues today, the minimum application is two lots (the smallest bundle of shares one can apply for), worth more than Rs 2 lakh.
Every SME issue today is fully underwritten, and a market maker must quote prices for at least three years after listing.
SEBI has proposed reducing the SME minimum application to Rs 1 lakh, and removing compulsory market making.
Will I have to sit with every adviser every day?
No. The team around you prepares data and answers questions day to day. Your time goes to the decisions only you can take. These are the size and purpose of the issue, board appointments, key disclosures, and signing the offer document.
Signing carries personal responsibility under the Companies Act, which is why every statement in the offer document should stand on a document. Mansukhbhai works with you and your accounts team to prepare what the merchant banker, auditors and legal counsel ask for, so most requests reach you once, already organised.
What is useful to agree with a merchant banker early?
- The team who will work on the file day to day
- What information is needed, and by when
- A realistic timeline from today
- How the issue will be taken to investors
I already have a merchant banker. Is this still useful?
Preparation runs beside your banker's work: books in order, restatement working papers ready, documents organised and supporting documents ready when a query comes. Most of it is information your banker will ask for in any case.
Is Mansukhbhai a merchant banker?
No. Mansukhbhai Management Services is not a merchant banker and is not registered with SEBI. Every IPO is managed by a SEBI-registered merchant banker appointed by the company.
D
Control and timeline
Your shares, your decisions, your timeline.
Listing changes who owns a part of the company. You still lead it, now alongside independent directors and public shareholders. Delays usually trace back to records that were not ready in time, and records can be made ready before filing.
11 questions
Do I lose ownership of my company if I list?
Your share falls, but the company stays yours. New shares are issued to investors, so your percentage falls, but in most SME IPOs the promoter group keeps a majority.
In an SME IPO, promoters must hold at least 20% of the post-issue capital for three years (locked in, so it cannot be sold). Of their holding above that, half is locked in for two years and half for one year. Main Board lock-ins are generally shorter: 18 months for the minimum promoter contribution (three years where the money is mainly for capital expenditure), and six months for the rest. What does change is how the company is governed: independent directors, committees and minority shareholders with rights.
We looked at an IPO before and stopped. Can we pick it up again?
Plans pause for many reasons: market timing, a change in priorities, the terms on offer, or open points in records and structure. The work already done is usually not lost.
Where the open points were in records, such as a restatement, a missing approval or a group company question, they can be continued from where they stopped.
How long does an IPO normally take?
- Preparation. Books, restated financial information, capital records, governance and key numbers. The longest and most variable stage.
- Offer document and due diligence. The draft is prepared and every statement checked against documents.
- Review. The draft is open for public comments for at least 21 days, and queries are answered before approval.
- Issue and listing. The issue is open for at least three working days, and shares list within three working days of closing.
How long the review takes depends on the queries raised, and is outside the company's control. The time you can save is before filing.
What can delay my IPO?
- Restatement adjustments found late in the process
- Gaps in share capital records or Registrar of Companies filings
- Title or lease documents not in order
- Unpaid taxes or government dues, or pending litigation
- Related-party dealings without paperwork
- Supporting documents not ready when a query arrives
- Financial statements becoming too old during the process
- Market conditions at the time of the issue
Most of these can be dealt with early, if they are found early.
Will my books be seen by outsiders?
The work on your books is confidential and covered by a confidentiality agreement. Nothing from it is published unless the company files an offer document, and then only what the regulations require.
The audited accounts the company already files with the Registrar of Companies stay public, as they are today.
Will my staff and suppliers hear about this before I tell them?Family
Not from the preparation, which is done in confidence. People learn of an IPO when the company chooses to tell them, or when the draft offer document is filed and becomes public.
My son is joining the business. Can he be on the board?Family
Yes, he can be appointed a director. A listed company also needs independent directors and board committees, so the board is planned with the rules on independence in mind.
We had a tax notice a few years ago. Will it have to be disclosed?Family
Outstanding tax claims involving the company, its promoters, directors and subsidiaries are disclosed in the offer document in total: the number of cases and the amount involved. Other civil cases are disclosed under a policy, approved by the board, that decides which matters are large enough to disclose.
Disclosure is normal. What matters is that it is complete, accurate and clearly explained.
Where can the money raised be used?
The use of funds must be specific and supported. In an SME IPO, money kept for general corporate purposes (money not tied to a named use) is capped at 15% of the amount raised or Rs 10 crore, whichever is lower. The money raised cannot be used to repay loans from promoters, the promoter group or related parties.
SEBI has proposed removing the Rs 10 crore cap and keeping the 15% limit.
What if we prepare and then decide not to list?
The company keeps the work: accurate books, a clear structure and restated numbers, which help with banks and investors too. Nothing is filed or made public unless the company files an offer document.
E
After listing
The market that priced you will read you again.
Listing day is the first day of a new discipline. From then on the market reads the company every reporting period, and the habits built in preparation carry it.
3 questions
What happens once I am listed?
- Financial results published every half year (every quarter on the Main Board)
- Related-party transactions approved by the audit committee and, where the law requires, by shareholders
- Important events disclosed to the exchange promptly
- Rules that stop insiders trading on information the public does not have, with set periods when they may not trade
- Independent directors and board committees
- Use of the money raised reported to the exchange, with any change explained
- Key numbers from the offer document reported for a period, and watched by the market
Planning for these duties before listing gives the company time to build the habits they need.
Can we move to the Main Board later?
Yes. A company listed on an SME platform can move to the Main Board once it meets the Main Board conditions and the exchange's migration criteria. Under the March 2025 amendments, an SME-listed company with paid-up capital above Rs 25 crore can raise further capital without being forced to move, if it follows Main Board disclosure rules.
SEBI has proposed deciding the platform by the company's total market value after the issue: up to Rs 1,000 crore on the SME platform, and a choice between SME and Main Board from Rs 1,000 crore to Rs 4,000 crore.
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