SME listings sink as mainboard IPO index delivers over 10% annual return

Of 151 SME IPOs listed this year, 70 trade below their issue price and 21 have lost at least half their value, while mainboard issues have delivered stronger returns

Of the 151 small and medium enterprise (SME) initial public offerings (IPOs) listed this year that raised ₹2,078.55 crore, 70 trade below their issue price and 21 have lost half or more of their value. Investors have little to show in terms of returns. The median SME listing is up 1 per cent, against 27.1 per cent for mainboard issues. Forty-six per cent of SME stocks are under water, against 27 per cent on the mainboard.

 

SME issues listed in July-September returned a median 0.1 per cent as of September 29, with 45 per cent trading below their issue price, Prime Database data showed. The first half of the year looks similar, with 47 per cent of the 76 SME issues listed in January-June trading below their offer price, with a median return of 5.1 per cent.

 

 

Over the last one year, the Nifty Emerge Index, which represents small and medium enterprises, has given a return of -2.3 per cent, but on the other hand, the Nifty IPO index is up 10.41 per cent, according to exchange data. Investors are avoiding SME investing due to the present macro environment, where there is uncertainty in the economy and markets have become volatile. Again, mainboard IPOs have seen some large company offerings like the NSE, where investors feel more secure and believe that they can make money in the long term. SME stocks are considered high-risk stocks and investors typically bet on them when the markets have bullish momentum.

 

Smaller companies that try to make their valuations attractive will take a worse hit than large companies in terms of market performance, according to Abhay Agarwal, founder and fund manager at Piper Serica. “Especially ones with SME merchant bankers, who are just trying to get the subscription done, make their money, because the cost of an SME IPO has also gone up. It used to be like 7 per cent till 12 months ago. Now it's in the 10 to 12 per cent range,” he said.

 

The pipeline, however, has not dried up, as September drew 52 SME offers worth ₹2,078.55 crore, the second-busiest month since January 2020, after September 2025. “I think September was a strange month because of that September 30 deadline. So everybody kind of piled in but there are still smaller IPOs. October we may not have too much of IPO activity (as) there is some fatigue,” said Agarwal.

 

The Emerge Index has a total of 539 stocks, where V Marc and Oriana Power are the top holdings, accounting for 7 per cent of the index, NSE data showed. Investors in SME IPOs have little to show for this year's listing rush. This is especially true when we compare it with mainboard IPOs. At a time when the Nifty 50 index is down 10 per cent over the last one year, investors are now avoiding the SME space, where risk-taking investors place big bets on small enterprises that they believe will deliver higher growth. The Nifty IPO index has Lenskart and Groww as the top holdings, accounting for 20 per cent of the index, which has 100 stocks.