New Delhi (India), August 14: The significance of Small and Medium Enterprises (SMEs) in fostering India’s economic growth cannot be overstated. Notably, there has been a notable surge in SME Initial Public Offerings (IPOs) in recent times, presenting distinctive opportunities for retail investors. This blog seeks to emphasize the advantages of SME IPOs for retail investors in India, delve into crucial factors to consider when participating in such offerings and showcase examples of successful SME IPOs from the preceding year.
Let us first understand a few basic words about IPOs:
Exchange: The stock exchange where the proposed IPO shares will be placed. Mainstream IPOs are traded on the BSE and NSE. SME IPOs are listed on the respective exchanges’ NSE EMERGE or BSE SME platforms.
IPO Open Date / Issue Closing Date: The dates on which the IPO bidding process begins and ends. During this time, investors can only apply for an IPO.
Lot Size: The smallest number of shares that an investor can apply for in an IPO. A lot size of ‘400’ indicates that an investor must bid on at least 400 shares.
Issue Price: The price per equity share is known as the issue price. Book Building IPOs and Fixed Price IPOs are the two types of IPOs. The pricing range for Book Building IPOs would be Rs 120-125, and investors must bid within that range. A fixed price issue has a set bid price.
Issue Size: The overall monetary value of the IPO is referred to as the issue size. It is calculated by multiplying the number of shares offered by the corporation by the share issuance price.
1. What benefits do SME IPOs provide to retail investors?
●Growth Potential & Wealth Creation:
SME IPOs allow ordinary investors to invest in small businesses in their early phases of development. These businesses frequently have intriguing business strategies and aggressive growth goals. Retail investors that participate in SME IPOs stand to win significantly as the companies expand and gain market share.
Phantom Digital Effects Limited’s initial public offering (IPO) is one such example. The IPO saw spectacular listing profits of 229.16%!
(Source: https://www.chittorgarh.com/ipo/phantom-digital-effects-ipo/1322/, listing date: Oct 21, 2022 )
●Diversification of Portfolios:
Investing in SME IPOs allows ordinary investors to diversify their portfolios beyond large-cap and mid-cap stocks. SMEs operate in a variety of industries, offering an opportunity to balance risk by expanding exposure to new industries and development drivers. This diversity helps to decrease exposure to market swings.
For example, the initial public offering (IPO) of Agni Green Power Limited, a green energy solar PV platform, allowed retail investors to engage in the expanding sustainable green solar energy segment, broadening their investment portfolios outside traditional sectors. Furthermore, the IPO saw 162% listing day gains, and the stock price is up from the listing price as of 12 June 2023.
(Source: https://www.chittorgarh.com/ipo/agni-green-power-ipo/1273/, listing date: Aug 01, 2022, and stock price as of date: 12-June-2023)
●Access to Promising Industries:
SME IPOs frequently arise from underserved industries with great development potential. Retail investors can take advantage of this chance to invest in these areas and benefit from their future possibilities.
The IPO of Droneacharya Aerial Innovations Ltd in December 2022, for example, demonstrated the potential of the drone business. The company’s impressive initial public offering performance, with the stock price virtually tripling in a short period of time, underlined the benefits of investing in a promising sector.
(Source: https://www.chittorgarh.com/ipo/droneacharya-aerial-innovations-ipo/1348/, listing date: Dec 23, 2022, and stock price as of date: 12-June-2023)
●Potential for larger Returns:
Compared to well-established companies, SME IPOs have a larger return potential due to their potential for growth. These businesses may see huge increases in valuation as they grow and seize market share. This potential upside could result in significant returns for retail investors who choose to invest in promising SMEs and take part in their initial public offerings (IPOs).
●Support for Small firms:
By making investments in SME IPOs, retail investors give small firms critical funding that might be essential for their expansion and success. Your investment helps to support entrepreneurship, generate employment opportunities, and boost the economy. SMEs are the foundation of market innovation and diversification since they frequently operate in specialized industries.
2. What should a person consider while applying for an SME IPO?
●Company Analysis:
It is critical to conduct an extensive study and analysis of the company’s fundamentals. Examine the business concept, competitive advantage, and future growth potential. Examine financial statements for information such as revenue growth, profitability, and debt levels.
●Management Quality:
Evaluate the management team’s skills and experience. Examine their abilities to carry out growth strategies and overcome obstacles. The track record and domain competence of the management team are critical to the company’s success.
The IPO of Infinium Pharmachem in April 2023, for example, demonstrated the necessity of a solid management team. The company’s management skills in the pharmaceutical industry, as well as its concentrated expansion strategy, aided in its successful IPO launch.
●Market condition and Timing:
Take into account the current state of the economy and the market mood. Determine whether the market is favorable for IPO investments. Analyze the IPO’s oversubscription numbers and demand as well. An oversubscribed IPO shows the market has faith in the business.
3. Top 10 SME IPOs by performance listed this year 2023:
| Company Name | Listed On | Issue Price | Listing Day Close | Listing Day Gain | Current Price | Profit/ Loss |
| Anlon Technology Solutions Limited | Jan 10, 2023 | 100 | 263.65 | 163.65% | 279.75 | 179.75% |
| Macfos Limited | Mar 1, 2023 | 102 | 174.8 | 71.37% | 309.2 | 203.14% |
| Sealmatic India Limited | Mar 1, 2023 | 225 | 236.25 | 5% | 617.25 | 174.33% |
| Srivasavi Adhesive Tapes Limited | Mar 9, 2023 | 41 | 42 | 2.44% | 112.45 | 174.27% |
| MCON Rasayan India Limited | Mar 20, 2023 | 40 | 50.4 | 26% | 166.65 | 316.63% |
| Infinium Pharmachem Limited | Apr 17, 2023 | 135 | 147.8 | 9.48% | 390.3 | 189.11% |
| Krishca Strapping Solutions Limited | May 26, 2023 | 54 | 112.9 | 109.07% | 184.1 | 240.93% |
| Remus Pharmaceuticals Limited | May 29, 2023 | 1229 | 1796.8 | 46.2% | 4401.25 | 258.12% |
| Vasa Denticity Limited | Jun 2, 2023 | 128 | 221.55 | 73.09% | 441.8 | 245.16% |
| Kaka Industries Limited | Jul 19, 2023 | 58 | 115.71 | 99.5% | 171.05 | 194.91% |
Source:- https://www.chittorgarh.com/ipo/ipo_perf_tracker.asp?exchange=sme
4. How to apply for SME IPOs
Investing in SME IPOs (Initial Public Offerings) has become more accessible and convenient with various online platforms. These platforms provide investors with user-friendly interfaces, expert research, and analytical tools, empowering them to make informed decisions. Whether you are a seasoned investor or a newcomer to the stock market, these websites cater to all, making the process of applying for SME IPOs efficient and hassle-free. Embrace the world of investment with confidence and explore promising SME IPO opportunities through these trusted online portals. Start your journey towards potential growth and financial prosperity with the support of these reliable platforms.
Several reputable websites, such as Zerodha and Motilal Oswal, offer users the opportunity to apply for SME IPOs seamlessly.
Conclusion:
In India, retail investors have a special opportunity to participate in the growth potential of small and medium-sized businesses thanks to SME IPOs. Retail investors can obtain access to promising industries, diversify their portfolios, and even make sizable gains by participating in SME IPOs. Prior to investing in SME IPOs, investors must perform thorough research of the firm, evaluate the quality of the management, and take the market into account. Retail investors can take advantage of the benefits of SME IPOs to improve their investment portfolios and seize the growth potential of promising small firms by conducting thorough research and making wise decisions.
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing. The securities are quoted as an example and not as a recommendation. This content is purely for information purposes only and in no way to be considered as advice or recommendation.
