SME listing euphoria fades in 2025 as regulatory oversight sharpens

37% close below issue price in debut trade in 2025 so far, against 9% last year

The listing-day euphoria for small and medium enterprise (SME) stocks appears to be losing steam, with a growing number of companies logging losses on debut.

 

Of the 165 companies that have collectively raised ₹8,192 crore on SME platforms this year, 61 firms -- 37 per cent -- closed below their issue price on listing day. By contrast, of the 227 firms that mobilised ₹8,479 crore in 2024, only 21 -- or 9 per cent -- slipped below the offer price in debut trade, according to data compiled by Business Standard.

 

The mood has cooled in other ways too. Only nine stocks have managed to double in value this year, compared with 69 in 2024. Last year, the SME segment was defined by extraordinary surges: Winsol Engineers soared 411 per cent on debut, while Maxposure, GP Eco Solutions, Medicamen Organics and Kay Cee Energy & Infra all posted gains above 300 per cent.

 

Tighter regulatory noose

 

The shift comes after exchanges moved to impose a 90 per cent ceiling on SME stock listing in July 2024, followed by the introduction of a 20 per cent floor below issue price in pre-open trades, effective August 2025.

 

These upper and lower caps, alongside broader regulatory tightening by the Securities and Exchange Board of India (Sebi), are the “two forces that have reset the day-one math”, according to Harshal Dasani, business head at INVasset PMS. The cap in listings, he said, kills the extreme gap-ups that characterised 2024 and makes opening prints far more disciplined.

 

With the pre-open ceiling binding, he added, “the grey-market premium no longer teleports into triple-digit day-one gains. The jump in red listings signals a market that’s pricing risk more rationally, not abandoning SMEs.”

 

Earlier, SME IPOs offered outsized debut-day returns, with some stocks doubling in a single session. But analysts argue that the 90 per cent cap has reduced the speculative allure. 

 

“The retail frenzy in the SME space has not waned. The average number of IPO applications is still higher than last year, showing strong retail participation. But the 90 per cent cap and aggressive IPO pricing have dampened post-listing momentum,” said Rahul Kumar Jha, principal for public equities at Bay Capital Partners.

 

Analysts also link the softer debuts to secondary market weakness. Nearly 45 per cent of SME listings from 2024 and 2025 continue to trade below their issue price.

 

The markets have not been working well, especially in the secondary segment, and IPOs in the primary market usually boom when there is liquidity, said Astha Jain, senior research analyst at Hem Securities. The 90 per cent ceiling may have curbed excessive retail exuberance, she noted, but “the overarching driver remains overall market sentiment.”

 

Jha echoed that view, pointing out that many SMEs have struggled in the first half of the year amid global volatility and weaker business performance, raising concerns about their sustainability after listing.