SME IPO - A Checklist: Is it For You?

Small and Medium Enterprises (SMEs) play a significant role in the growth of any country's economy. While they face several challenges, raising funds to fuel their growth is the most critical one. With limited resources and funds, SMEs often struggle to expand their business operations, reach out to new markets, or adopt new technological solutions.???

However, as the global economy is changing rapidly, traditional banks are not the only source of funding for SMEs anymore. IPO can be a good option for SMEs to access funds with little financial or legal loose ends. An IPO (Initial Public Offering) is a process through which a private company issues shares to the public in a new stock issuance. SME IPO, in particular, is a method to borrow from the public, even though it is limited to only small and medium-sized enterprises, in certain geographical boundaries.???

For SMEs, the idea of an IPO can be enticing, but it is important for business owners and top management to understand various intricacies of the IPO process.

Here is a checklist to guide you:??

Market Expectations???

1. Poor market conditions in terms of liquidity and funds are not suitable for IPOs. Ensure that there is a stable market scenario with reasonable improvements in operations and finances.???

2. Try to understand the recent trend in the market regarding the concerns similar to your business.???

3. Merely pursuing the filings to IPO for diversifying ownership and partnerships may lead to selling the business, ultimately. Make sure it meets the high-quality and necessary liquidity criteria prior to the IPO.???

4. Check whether received a better offer or not because running a business separately and having an additional debt to pay for is much costlier than joining with another company.?

Financial Health??

1. After the announcement of the SME IPO, invest your patience and time in preparing the company's financial health in a detailed way. This is because, an SME IPO involves the assessment of the Company's complete financial policies like management practices, tax policies, etc.?

2. A company's net-worth should not be negative before SME IPO process and it is compromised by debts. Its credibility maintenance is essential during the IPO process.???

3. Credit rating improvement. With the SME IPO, the creditworthiness and company ratings should improve. This will exhibit the company's ability to pay back its debt.?

4. For this funding purpose, the IPO process should not be used as license compromise. While, financial independence it provides, but at the same time there is a certain course of finance which is risky.???

Technology Practices???

1. SME IPO does not just mean going public and gaining fame but also promotes your company's image. You should tune your company's technology practices which are relatively updated.???

2. The compliance may vary in diverse forms with a listed company and an unlisted and make sure it is in accordance with that. Eidem.???

3. Evaluate practices of good governance in a regular company. and update the system with the latest technologies and Frameworks for best practices of governance.???

Operational Aspects???

1. Avoid situations where you've been in a hurry to IPO to raise funds, the entire fund will be adequate enough for company subsequent operations. This is where the 'cash burn' comes into play.???

2. Uncover the internal processes and workflows that requires some re-engineering and make revamping is happening before IPO filings are done.???

3. It is important to define the roles and responsibilities for the team of finance function, rather than just repetition of everyday life. And this becomes mandatory, after the IPO process.??

Legal and Compliance issues??

1. Make Your IPO structured to meet these two provisions of Direct appropriate laws, legal or clarificatory requirements etc., and the rules of the Regulatory authorities including SEBI???

2. A public company needs to have a set up of an independent secretary and also a company monitor. In some cases, you need to employ them during the period following after the IPO process.???

3. subsequent to the completion of compliance requirements in the lead-ups, you are talked into setting them in audiobooks. The solution is to verify them yourself or keep calling your auditors.???

Conclusion:???

A detailed investigation of the following areas can help an SME to understand if it is ready for an IPO filing. A ready IPO playbook, a broad and deep understanding of both the areas of finance and technology as well as the execution of it is decisive for an SME in embracing it. Addressing these issues will help owners and management to decide whether SME IPO is a right move for them or not.?

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If as a SME owner, you have even slightly inclined to initiate an IPO process, now would be the time to address all the core questions. Seek advice from experienced professionals who can support you throughout the IPO process, implement expansion plans and improve value to be realized. Major changes, including regulation of capital, scale, depth, quality and assurance, technology and public policy will have an impact on how SME works and operates.?

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For more information on how you can prepare for SME IPOs, connect us today!?

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