MUMBAI: The public listings of small and medium enterprises (SMEs) have outperformed listing companies in terms of earnings over the past one year as free float is relatively lower after price hikes when the demand is disproportionately higher than supply in a structural structure. bull market. However, market experts cautioned investors to take an informed decision while choosing SME IPOs and invest only in quality businesses, as a rising tide will raise every boat.
Over the past year, SME IPOs have been extremely successful in terms of listing gains and returns over the past year. They listed at a median gain of 12.1% on their offer price, compared to 8% for main program IPOs. Their median annual returns from listing are 61%, higher than the 52% for IPOs on the main board. The BSE SME IPO index also outperformed the BSE IPO index, returning 123% over the past year, compared to 36% for the latter.
The BSE SME IPO index includes SME stocks that were listed a maximum of three years ago, while the BSE IPO index includes mainline stocks that were listed a maximum of one year ago.
However, around 40% of the 169 SME IPOs considered in the analysis have lost share value since listing, while the share for the top 50 IPOs is 28%. This shows the caution investors need when investing in SME IPOs based on short-term bull runs. The analysis covered all IPOs from the one-year period from 17 November 2022.
“In bullish markets, the relatively smaller size of the issue and low liquidity can be an advantage especially if the demand is higher than the supply of promising offers from quality companies. A similar trend was seen in SME IPOs during the year 2016/2017. wave but it did not end well for many retail investors,” said Gaurav Dua, SVP & head of Capital Market Strategy, Sharekhan with BNP Paribas.
“There are some very interesting and promising businesses listed through the SME platform. So instead of chasing short-term listing gains and chasing the momentum, it would be better to do your homework and be very selective when investing in SME IPOs,” he said.
Some of the best SME IPOs in this period include Rajasthan-based Goyal Salt Ltd, which listed at a 242% gain on issue price ₹38 on its debut on 11 October, followed by Sungarner Energies Ltd, which opened at ₹250 on August 31, a 201% premium over its issue price. Basilic Fly Studio Ltd is listed at ₹271 on September 11, a 179% premium over the issue price of ₹97. Baheti Recycling Industries Ltd (167%), Oriana Power Ltd (156%), and Infollion Research Services Ltd (155%) followed.
Among major IPOs in the period, Ideaforge Technology was the best performer in terms of listing gains, listed at ₹1,305 on July 7, a premium of 94%, Netweb Technologies (89%), and Aeroflex (83%). Also on the list was Utkarsh Small Finance Bank, which issued shares at ₹25, opening at ₹40 on July 21, retaining a whopping 60% premium.
According to a report by EY India on November 1, the small and medium enterprise segment of the IPO market recorded significant success in Q3 2023, raising $165.76 million through 48 IPOs. The strong performance of the SME IPO market was one of the factors that pushed the overall Indian IPO market to a record quarter. In Q3 2023, a total of 21 IPOs were launched on the main board, raising $1,770 million, a significant increase of 376% over $372 million in Q3 2022. This represents a significant 425% increase in the number of deals.
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