SME IPO Fever: 18% Issues This Year Receive Bids In Excess Of Rs 10,000 Crore

Small and medium enterprises which filed for initial public offerings in 2024 so far saw an overwhelming demand, with 43 of the 238 issues receiving bids in excess of Rs 10,000 crore.

The investor response was unprecedented as the issue size of these IPOs was in the range of only Rs 5.1 crore to Rs 188 crore.

The increasing demand for SME IPOs was also reflected in the surge in number of issuances. This year, 56 more SMEs filed for IPO compared to last year.

The total bids received for the SME IPOs launched in 2024 so far is 13,836% higher than the total funds raised. In comparison, the cumulative bids drawn by SME IPOs in 2023 was 7,174% higher than the overall amount raised. The figure stood at 4,274% in 2022.

In a report released on Friday, Motilal Oswal said that the aggregate market capitalisation of all SMEs has increased by 31% from their listing day, while mainboards have risen by 10%.

The brokerage said, "We expect the fundraising momentum to continue moving forward, as India possesses a remarkably resilient macroeconomic landscape that has withstood various challenges."

"The blazing growth of Indian markets, along with wider participation from multiple sectors and smaller companies, as well as a wave of new issuances across sectors, has effectively quelled the traditional concerns about market size, depth, and diversity," it said. "This evolution has paved the way for diverse investment opportunities across the market spectrum and its sub-sectors."

This week, the SME IPO of NACDAC Infrastructure Ltd., which opened for subscription on Tuesday and closed on Thursday, received a tremendous response from the investors with the IPO getting subscribed 2,209.76 times. The offer was subscribed 2,503.66 times in the retail category, and 4,084.46 times in the non-institutional investors category. The qualified institutional buyers subscribed 236.39 times the portion allotted for them.

Market regulator SEBI, in its board meeting held on Wednesday, approved stricter norms for these companies filing for public issues. Now, the SMEs will be required to show an operating profit of at least Rs 1 crore from operations for two out of the last three financial years at the time of filing their draft red herring prospectus. 

Additionally, any offer for sale by selling shareholders in an SME IPO will be capped at 20% of the total issue size, with selling shareholders prohibited from selling more than 50% of their holdings. 

Here's a list of SMEs whose IPO received bids in excess of Rs 10,000 crore.