The SME IPO market has grown exponentially in the recent past, surging by over 5000% in the last five years. Just this year, it has already increased by over 100%.
The boom was particularly stark post the Covid-19 pandemic and It coincided with the rise of retail investors in Indian markets, who have shown a greater risk appetite for investing in smaller companies.
Since April 2020, India has seen close to 500 small and medium enterprise (SME) IPOs that have raised about Rs 12,500 crore, according to Zerodha.
As investor response evolved, reflected in high subscription numbers, the listing gains of many of these IPOs skyrocketed. This trend encouraged more small companies to access the public markets, regardless of prevailing market sentiments.For instance, this year, as many as 110 companies have listed on the SME platforms of both exchanges, with numerous multibagger listings. In the last two months alone, the market witnessed 10 multibagger debuts.Analysts believe the SME segment has evolved from being a fringe market to a mainstream asset class for investors. As the market grows, some concerns are emerging from the regulators regarding investors’ safety and price manipulation.This shift is evident as regulators are looking for ways to bring in more stringent checks to ensure stability. Sebi has flagged, many instances, and concerns around potential froth in the segment and is putting in measures to prevent any manipulation. Recently, leading exchange NSE has introduced a 90% cap in the pre-open price discovery session for SME IPOs.
