The SME IPO frenzy, which had surprised many in the past couple of years, has caught further wind this year with the total fundraise in the first four months already alf of what was seen in 2023. The number of issues and the overall fund activity this year is set to surpass 2023 levels, according to market participants.
As of April 30, 73 companies got listed on SME platforms – BSE SME and NSE Emerge – raising Rs 2,323 crores in 2024, as per PRIME Database.Compared to this,182 public issues raised Rs 4,686 crores through SME platforms in 2023, which was a record shattering year. The data shows the average issue size in 2024 has risen to around Rs 32 crore from Rs 26 crores in 2023.
A platform for small-and-medium enterprises, exchanges launched dedicated platforms for SMEs in 2012. While the first few years were lull, the number of issues crossed 100 for the first time in 2017. The total fundraising through SME platforms also surpassed Rs 1,500 crores for the time this year.
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However, things again went south in 2019, when the number of issues dropped sharply. Even in 2020 and 2021 – the initial years of COVID pandemic – the number of SME issues remained feeble.
Nevertheless, low interest rates and India emerging as key investment destination, aided the popularity of SME platforms again in 2022. Experts see this as the SME platform’s moment in the sun. The increase in trading volumes has been giving further confidence to investors to take exposure to the SME platform.
Undeterred by the ongoing General Elections, the rush of new issues continued in April and the pipeline for May looks strong as ever. “SMEs are now regarded as an asset diversification rather than a risky play where investors are going big or going home. India is full of great small andmedium businesses that are emerging from all corners and being showcased in the capital markets,” said Kush Gupta, director at SKG– Investments & Advisory.
Tarun Singh, managing director at Highbrow Securities, said there are currently 900 SME IPOs in the making. “Even if half of them make it through due diligence, 450 will get listed in the next 1 year,” Singh said.
As per Singh’s estimate, 2024 could see roughly 400 SME IPOs, double of what was seen in 2023. He said investors are optimistic about SME IPOs given their strong performance, reasonable valuations, and increased liquidity providing easy exit opportunities.
Gupta too said there are a plethora of investable SMEs out there navigating their way to the stock market.However, he expects number of SME listings in 2024 to be between 150-175, almost similar to last year.
Though SME platforms are having their best years, it hasn’t been all hunky dory. In March, market regulator Securities and Exchange Board of India (Sebi) raised warnings bells of price manipulation in some SME IPOs.
Unlike the mainboard listings, companies listing on SME platform do not have to follow stringent norms. The norms for minimum issue size, disclosure requirements, etc are relaxed for them.
After the SEBI’s warning, the SME IPO index on BSE dropped nearly 11% in March, registering its worst month in nearly 2 years.
However, the recovery was quick and resounding, as the index soared 31.5% in April. Experts see this as an indication of investors faith in the SME market and said they do not see this leading to tighter regulations for the segment, as it would mean tinkering with a platform that is just in its nascent stage.
