SME IPO Performance in FY 2022-23: How SMEs Overperformed Mainboard IPOs?

SME IPO Performance in FY 2022-23: How SMEs Overperformed Mainboard IPOs?

Analysis of SME IPO Performance in FY 2022-23 - ASC Group

In FY 2022-23, the stock market might have disappointed investors in terms of providing adequate returns. However, as per a recent publication by the Times of India, it has been notably a great year for the public share sale of small and medium enterprises (SMEs). Like regular listing of shares of the companies, SMEs too can list their shares on a dedicated exchange i.e., the SME exchange. In the last year, performance of SME shares was surprising as it earned huge returns for investors. Let’s take a look at the figures:

  1. SME firms have raised Rs. 2232 crores of investments through 125 share offerings in the FY 2022-23. This is thrice the 37 mainboards share issues in the stock market. Until now, FY 2017-18 was the best year with Rs. 2225 crores from 155 offerings. 
  2. The collection in FY 2022-23 was 128% higher than the previous year.
  3. 1 in every 5 SME IPOs was oversubscribed by more than 100 times.
  4. 15 SME IPOs were oversubscribed by 200 times. 
  5. 82% of the companies gave positive returns on the listing day in the SME exchange. While in the mainboard issuances, only 65% companies managed to give positive returns. 
  6. The NSE Emerge and BSE SME IPO indices provided returns up to 32% and 76% respectively. This is against -4% returns by both BSE small-cap and Nifty 500 indices.

Analysis of the SME IPO’s Performance

The performance of SME IPOs is noteworthy and surprising considering that the equity markets failed to perform last year. As per the experts, the past performance of SME IPOs in the last two years lured HNI and retail investors to invest in this segment. Investments that generate profits over a period of time attracts investors. In the recent past, several SME IPOs turned out to be multi-baggers. However, it is difficult to predict how many of the newly listed stocks will do well in the long run. Many investors turn stag. They exit the market on the day of listing.

However, here is a word of caution. Many experts say that investing in SME IPO does come with a risk of losing the entire capital. One of the key reasons is that there is not much data available relating to SME companies in the public domain. They are not traced by the analysts as well. Therefore, retail investors should remain cautious then they consider investing in SME IPOs. This is because it is difficult to assess the quality and expertise of management as most of the companies do not have a long performance record. Investors can use the balance sheet, valuations and business model while making an investment decision. 

Key Notes About SME Segment

MSME and SMEs represent 40%-45% of India’s manufacturing and industrial GDP. The scope of MSMEs and SMEs to tap the market is huge considering that the cumulative market capitalisation of the SME stocks is less than Rs. 1 trillion. The SME sector has been facing liquidity issues. A recent working paper released by IPO emphasized that such IPOs need more participation from institutional investors. 

Are you investing in SME IPOs? ASC Group have IPO expert & professionals who can assist you throughout the process with insightful financial advisory, capital value, documentation process, etc.

Also Read - SENSEX Performance: Analyzing Stock Market Returns of Last 20 Years


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