The year 2024 has witnessed extraordinary demand for Small and Medium Enterprise (SME) IPO, with 43 out of 238 issues receiving bids exceeding ₹10,000 crore. This surge in investor interest is remarkable, as the issue size for these IPO ranged from just ₹5.1 crore to ₹188 crore, highlighting the growing appeal of SMEs in the public markets.
A Record-Breaking Year for SME IPO
As of now, 56 more SMEs have filed for public offerings in 2024 compared to the previous year, a clear indication of the sector’s rising popularity among investors. The total demand for SME IPO this year has been 13,836% higher than the total funds raised, a significant increase from the 7,174% rise in 2023, and a substantial jump from 4,274% in 2022.
According to a report by Motilal Oswal, the aggregate market capitalization of SMEs has increased by 31% since their listing day, outperforming mainboard stocks, which have risen by 10%. This growth trend is expected to continue as India’s resilient macroeconomic landscape provides a solid foundation for SME expansion.
Impressive Subscription Figures
One standout example is the recent NACDAC Infrastructure Ltd. IPO, which received a staggering 2,209.76 times subscription, with retail investors contributing to 2,503.66 times and non-institutional investors at 4,084.46 times. The qualified institutional buyers’ portion was subscribed 236.39 times.
SEBI’s New Norms for SME IPO
In response to the growing SME IPO market, SEBI has introduced stricter regulations for companies filing public offerings. SMEs must now demonstrate at least ₹1 crore in operating profits for two out of the last three financial years before they can file their draft red herring prospectus. Moreover, any offer for sale in an SME IPO will be capped at 20% of the total issue size, and selling shareholders will be prohibited from selling more than 50% of their holdings.
SME IPO with Demand Over ₹10,000 Crore
Several companies have witnessed incredible demand for their shares, including Ganesh Infraworld Ltd., which received ₹23,396.53 crore in bids—an oversubscription of 263.7 times. Other notable IPO include Nephro Care India Ltd., with ₹19,818.63 crore in demand, and Lakshya Powertech Ltd., which saw ₹19,385.18 crore in bids.
Looking Ahead
The surge in SME IPO signals growing investor confidence and a more diversified market, attracting interest across various sectors. Motilal Oswal believes the fundraising momentum will continue as the market adapts to changing dynamics, creating diverse investment opportunities.
With the SME IPO space showing significant growth and interest in 2024, these companies are now a key part of India’s rapidly expanding market, opening up exciting avenues for both investors and businesses alike.
