What was apparently very superficial and restricted market Four years ago, fewer than 500 applicants per share sale on average now attract applications running into six figures. Statistics show that from just 408 applicants on average in FY20 and 511 in FY21, these SME IPOs attracted a staggering 219,000 applications so far in FY25.
Data from Primedatabase.com also showed higher risks and a minimum commitment of ₹1 lakh failed to deter the number of applicants.
“In a bull market, investors “The trend is to invest in all IPOs, hoping to get allotments in some, due to the high probability of gaining per listing,” said Pranav Haldea, CEO, PRIME Database Group. “The advent of trading apps has streamlined the process of investing in IPOs, reducing it to just 3-4 clicks. Now, the funds remain in the bank account till allotment, making it an attractive option.”
The average increase in listing based on closing price in FY25 is 76%, with the number of applications exceeding 218,000. In four IPOs (Hoac Foods India, Medicamen Organics, Koura Fine Diamond Jewelry and Maxposure), the retail portion was subscribed more than a thousand times. Retail interest in SME IPOs increased sharply from FY23, driven by significant rallies in some issues and record gains in listings. In FY22, the average number of applications was 6,042, with average gains in listings at 19%. This trend accelerated in FY23, with the average increase in the number of applications to 31,500 and gains in listings at 29%. In FY24, the average gains in listings exceeded 50% and the number of applications increased to 113,000 per IPO.
Caution Sebi
The frenzy of SMEs in IPOs prompted market regulator Sebi to issue a warning on investments in securities of companies listed in the segment. Sebi said some SMEs and their promoters have been employing tactics to project a misleadingly positive image of their operations, and then have leveraged this momentum to offload their own holdings at a profit.
To bring more stability to the price discovery process for SME shares, the National Stock Exchange in early July imposed a 90% limit on the offer price for SME IPOs during a special pre-opening session on the listing day. This year, about 60 IPOs were priced between 90% and 400% above the issue price.
Several market experts have also advised retail investors to exercise caution.
Haldea highlights a pressing concern.
“What is even more worrying is that many retail investors today are relatively new, having opened their demat accounts only in the last 3-4 years. Consequently, they have not experienced significant market corrections or major frauds, making them more susceptible to risks,” he said.
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