Data obtained from Prime Database shows that 152 SME IPOs This year, 1000 shares of the company were floated with an average issue size of Rs 330 crore and an average oversubscription of nearly 200 times. Of the total, 18 were oversubscribed more than 400 times. For example, the Rs 50 crore IPO of Hoac India Foods was subscribed 1,963 times in May. Similarly, the IPO of Rs 6.6 crore of Magenta Life Care It was oversubscribed by more than 1,000 times.
The data shows that for every IPO by a parent company, around three SME IPOs have been launched in each of the last three years. A total of 45 IPOs by a parent company have been launched so far this year, with an average issue size of Rs 1,074 crore and an average oversubscription of 43 times.
The rally on the runway in India stock market Since the Covid-19 pandemic abated, there has been strong speculative interest in small-sized SME IPOs. Over the past three years, SME IPOs have significantly outperformed mainstream IPOs in terms of oversubscriptions. listing gains and post-listing returns. For example, 182 SME IPOs were launched last year with an average oversubscription of 86 times, average listing gains of 36% and average share returns of 216%. In contrast, 57 main board IPOs were launched with an average oversubscription of 32 times, average listing gains of 29% and post-listing gains of 216%. By the way, the average listing gains of SME IPOs have been steadily increasing over the past three years. From an average listing gain of 2.2% in 2019, the average listing gains of SME IPOs have risen to 74% in 2024.
The lure of attractive listing gains coupled with strong post-listing stock performance with low capex has ensured sustained investor interest in SME IPOs despite the nature and size of the underlying businesses.
Market regulator Sebi has urged stock exchanges to be more cautious when approving SME IPOs, asking them to step up due diligence even if it slows down the approval process in a bid to protect investors’ interests.
For now, SME IPOs appear to be the new low-priced stocks fueling speculative interest in a booming stock market.
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