Small and medium enterprises are pivotal to the economy of India where it has a contribution towards employment, innovation and GDP. With these companies expanding and their operations scaling up, many turn to IPOs as a way of raising capital for growth. This article explains in detail the meaning of SME IPO and presents a detailed performance analysis of SME IPOs, as well as the factors that investors should consider when making investment decisions.
SMEs Thrive with Increasing Trends
SMEs are turning more and more to initial IPOs in order to secure funding and drive expansion. In 2024, SME IPOs saw significant attention from both retail and institutional investors. The year 2024 has been notable for small and medium enterprise IPOs. This increase shows that small businesses are gaining more trust in public markets and that investors are showing strong interest.
Understanding SME IPOs
SME initial public offerings (IPOs) are small and medium enterprises offering shares to the public for the first time. These stocks are usually found on specific platforms such as the BSE SME and NSE Emerge, which focus on companies needing less capital than those in mainboard IPOs.
An SME IPO offers a different option for small and medium enterprises who are not listed to raise funds from the stock market. SMEs can gain funding for strategic business operations by listing their securities on the stock exchange, and investors can spot SMEs with high growth potential and lower capital expenses in a mutually beneficial situation.
Based on a report on SME IPO trends in May 2024, from January 2021 to March 2024, nearly 947 businesses were listed on SME stock exchanges and collectively raised about ₹9,489 crore.
Some Notable Performers
| Companies | Subscription | Issue Price(₹) | Listing Gain(%) | Current Price(₹) | Current Gain(%) |
| Kay Cee Energy & Infra | 960X | 100 | 366% | 442 | 342% |
| Maxposure | 900X | 150 | 200% | 450 | 200% |
| Fonebox Retail | 613X | 120 | 200% | 360 | 200% |
| Trident Techlabs Ltd. | 450X | 35 | 194% | 719 | 1954% |
| Ganesh Green Bharat Ltd. | 109X | 190 | 109% | 460 | 142% |
Why Invest in SME IPOs?
Investing in small and medium-sized enterprises’ IPOs can yield substantial rewards, both in terms of financial gain and in supporting the overall economic landscape.
High Growth Potential: Small and medium-sized enterprises typically embody developing sectors or original business structures with strong potential for growth. Investing in the early stages can result in significant profits as these companies grow. TBI Corn is a perfect instance of an SME IPO that has grown substantially.
TBI Corn exemplifies significant growth, transitioning from a private to a publicly traded company, as a successful SME.
On June 7, 2024, TBI Corn stock was trading at ₹198 per share, representing a 110.64% premium from its IPO price of ₹94.00 per share. The highest price for the day reached ₹207 while the lowest price was fixed at ₹188.
In July 2024, the stock price rose to ₹330 per share, showing a remarkable 218% increase from the initial price.
Investors who got in early with an initial ₹1,00,000 investment at the IPO price would currently see a value of around ₹37 lakhs, demonstrating the significant returns achievable by investing strategically in fast-growing SMEs.
Diversification: SME IPOs provide diversification opportunities for investors since investors are presented with other opportunities beyond large, heaping, and established organizations. These companies belong to different sectors and can provide a distinct risk /return combination to an investment portfolio.
Economic Growth: SME IPOs can be very useful for the economy of a country in particular and it can positively influence the overall health of a nation’s economy since it will assist in increasing employment rates, innovation as well as regional development.
Untapped potential: There are few segments of the Indian economy that are as critical as small and medium enterprises that are key players in contribution to GDP and employment. It’s important to ensure that many startup businesses that are needed to stabilize the economy are sponsored in their Initial Public Offerings.
Conclusion
SME IPOs have proven to be a lucrative investment avenue that offer substantial returns and reflect strong market confidence. The more you invest the better off you’ll be, and the nation will be better off as well, because your money will help create new businesses and create more jobs and hence build a stronger backbone for the economy.
With continued regulatory support and a growing pool of innovative SMEs, the future of SME IPOs looks promising. Investors should stay informed about the latest developments and carefully evaluate the financial health, growth potential, and strategic focus of SMEs to capitalize on this exciting market segment.