Notwithstanding the boom in the main board primary market issuance, retail investors’ interest in initial public offering on SME platforms have also touched a new high.

SME segment saw 166 companies raising an aggregate of ₹4,472 crore by listing on both BSE SME and NSE Emerge. The most interesting aspect of SME IPOs was the subscription rates. Fifty one of the 166 companies witnessed subscription rates of more than 100 times, with 12 companies seeing over 300 times subscription, according to FYERS Research.

This magnitude of subscription rates across so many IPOs was unheard so far till now. Retail interest in some IPOs has broken all previous record subscription rates. The huge listing gains on the back of hefty over subscription had attracted retail investors to bet big on the small ticket IPOs.

Alok Haralalka, MD, Gretex Corporate Services, said SME IPO space has seen a tremendous response from all category of investors in the last few years.

A lot of credit for oversubscription goes to the institutional investors who have shown interest in the SME companies and their participation has helped boost retail and non institutional investors confidence in these small companies operations, he said.

Interestingly, 136 out of the 166 companies were listed and closed in positive territory on the listing day.

Mad rush

Spectrum Talent Management raised the highest amount of ₹105 crore on SME Exchange this year, while the issue of Shoora Designs, a rough diamond processing company, was the lowest at ₹2 crore.

Kahan Packaging, which received subscription of ₹3,974 crore for an issue size of ₹5.76 crore, is currently trading at ₹86 against the issue price of ₹80 after hitting a high of ₹152 on listing day.

Similarly, Net Avenue Technologies had got a response of ₹3,488 crore for an issue of ₹10.3 crore. The shares, issued at ₹18 a piece, are currently trading at ₹30 after hitting a high of ₹43 on listing day.

Telangana-based Srivari Spices and Foods received bids worth ₹2,700 crore for an issue size of ₹9 crore. Its shares were trading at ₹184 a piece on Friday against the issue price of ₹42 in August. It had listed at a high of ₹149 on listing day.

Chasing alpha

Avinash Gorakshakar, Head Research, Profitmart Securities, said investors in SME companies have realised that good companies can generate significant alpha to investors and this was the key reason for investors to look into this segment.

Also big funds, ultra HNIs have entered the SME segment which had further bolstered the confidence of retail investors.

While the risk in SME companies are high, he said investors are considering the overall big opportunity over the next 2-3 years.

However, he added investors should be careful with market rally pushing up valuation of SME companies to sky high.

Going ahead, investors should be selective and understand that listing gain is just a short-term phenomenon, said Gorakshakar.