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The appetite for initial public offerings on the SME exchanges has remained more robust than that on the main bourses. The SME exchanges of the BSE and the NSE registered the highest-ever number of IPOs at 145 in 2018, against 24 logged on the main bourses.
However, the amount raised by the IPOs of mature companies on the main bourses was much higher at ₹31,044 crore, against ₹2,455 crore raised by the SMEs.
In 2017, about 36 companies raised ₹66,945 crore through the IPO route, while 133 companies mopped up ₹1,785 crore on the SME platform.
As on date, there are over 5,000 companies listed on the BSE SME Exchange and 1,600 companies listed on the NSE Emerge platform.
Mahavir Lunawat, Managing Director, Pantomath Capital, said though volatility in the main bourse had its impact on the SME platform, there was good demand for quality IPOs on the SME capital market.
Gujarat topped the list with 47 companies from the State listing on the SME platform followed by Maharashtra with 38 companies, while Delhi remained a distant third by listing 14 companies, he added.
East India Sec leads
The public issue of East India Securities which raised ₹93 crore was the largest followed by ₹85 crore and ₹78 crore raised by MMP Industries and Sirca Paints.
On issue of liquidity constrains in the SME platform, Gaurav Jain, Director, Hem Securities, said though reducing the minimum investment limit from ₹1 lakh may be an option to improve liquidity, regular communication on developments in companies listed on the SME platform can also boost liquidity, as investors are more comfortable investing in transparent and good corporate governance companies.
In 2018, about 17 companies migrated to the main BSE board from the BSE SME platform while just one company switched to the NSE main board from NSE Emerge. Sirca Paints and Marine Electricals have delivered 56 per cent and 20 per cent return, respectively, since their listing, even while most other IPOs gave flattish returns.
Concerns
As a word of caution on investing in equity markets, Dhiraj Relli, Managing Director and CEO, HDFC Securities, said many companies may fail the test of survival in an era of constant disruption owing to regulations, technology or capital availability.
A staggered investment in direct equities after sufficient due diligence may result in lowering their risks when the world is witnessing a paradigm shift in business models and the valuations assigned to them, he said.
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