SME IPOs shrug off pandemic, mop-up surges nearly five-fold in 2021

Garner Rs 746 crore from 59 offerings as risk-on sentiment returns

Collections from public share sales of small and medium enterprises (SMEs) saw a resurgence in 2021 after seeing a lull in CY20 in the aftermath of the pandemic.

SMEs have mopped up Rs 746 crore from 59 offerings in 2021, 4.7x the amount garnered in 2020 from 27 offerings. This is still far lower than the record Rs 2,287 crore mopped up in 2018 and Rs 1,679 crore collected in 2017.

According to experts, the number of issuances dropped in 2020 as investors preferred larger companies that were deemed to be more resilient amid the pandemic rather than risking their capital on smaller names. The return of risk-on sentiment has aided their cause.

Top gainers this year include EKI Energy Services (9633 per cent gain over issue price), BEW Engineering (715 per cent) and Prevest Denpro (416 per cent), according to primedatabase.com.

Since 2012, about 68 per cent, or 257 out of 378 companies for which data is available, have made money for investors. Twenty eight companies have returned in excess of 1,000 per cent and 165 have given returns of over 100 per cent. Fifty seven have slid more than 50 per cent. EKI Energy Services (9633 per cent), Sangam Advisors (9213 per cent) and Lancer Container Lines (7,054 per cent) have clocked the most returns. In all, 193 companies have migrated to the mainboard so far.

The market capitalisation of companies listed on the BSE SME platform crossed Rs 50,000 crore on Friday, according to a note put out by the exchange. “Small and Medium enterprises are the backbone of the Indian economy and the milestone is a testament to the efforts put in to create awareness among SMEs about the benefits of listing,” said Ajay Thakur, Head – BSE SME & Startups, adding that in the last decade BSE had met 36000 SME promoters, organised 2500 seminars and 500 webinars across the country.

BSE’s SME platform has seen 372 companies raise Rs 3562 crore of equity funds. NSE’s Emerge platform has seen 238 companies getting listed, aggregating to Rs 3,434 crore, according to primedatabase.com.  

Vikram Limaye, MD & CEO, NSE, said: “NSE Emerge has focused on developing an ecosystem for the small and medium enterprises to access the capital markets for mobilizing funds. Many companies have migrated from the SME platform to the mainboard. We also actively engage with various government bodies, intermediaries, industry associations as well as the SMEs to spread awareness about the advantages of listing on the SME platform. We are committed to facilitating the SME’s in their fund-raising efforts.”

Despite the possibility of high returns, experts said there was a chance of losing one’s entire capital in SME stocks. Analysing these firms could be tough because they are not tracked by analysts and there is limited data in the public domain. Investors are left to themselves when it comes to gauging the credibility of promoters. The SME segment has also been grappling with lack of liquidity and lacklustre institutional participation.

The BSE and the NSE had launched separate SME platforms in 2012 and 2013, after the Securities and Exchange Board of India (Sebi) came up with easier listing and disclosure guidelines to help small companies tap the capital market.

Besides improved transparency, an IPO route for SMEs reduces their dependence on debt financing and helps them maintain their debt-equity ratio efficiently, said experts. Listed SMEs with good ratings are able to get loans at lower interest rates than the market.