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Small and medium enterprise (SME) IPO market has started to gain traction among investors, with public issues of several firms, including DRA Consultants and Sysco Industries, getting oversubscribed multiple times.
Moreover, mutual funds, banks and brokerages have started showing interest in the initial public offering of quality SMEs. DRA Consultants, Sysco Industries, Commercial Syn Bags, Vidli Restaurants have garnered multi-fold subscriptions from public.
The very basic factor which attracts retail participants in an SME IPO is popularity of the company in local markets. “Initial investors in public offers can be the individuals who know the companies because they are from the same region or are involved in the companies in some way or the other,” Pantomath Group MD Mahavir Lunawat said.
Nagpur-based DRA Consultants, which concluded its Rs 2.96 crore public issue last week, garnered a record over-subscription of more than 12 times of total shares offered.
The initial share-sale programme of Sysco Industries was subscribed by 10 times, while the same for Commercial Syn Bags and Vidli Restaurants received over-subscription of 7 times each.
Momai Apparels’ over Rs 43 crore IPO was over-subscribed by 1.84 times. Notably, the public issue received record participation with more than 2,800 applications from retail and HNI investors.
Collectively, around 195 companies are listed on the SME platforms of BSE and NSE till date. Almost all companies’ IPO get over-subscribed on the SME platform but marginally.
Earlier, SME IPOs used to be subscribed by 1-2 times but now a new trend is emerging wherein public issues on these platforms are getting over-subscribed by 8-10 times. This indicates SME market getting broad based. “It is heartening to note that bigger and growing SMEs continue to repose confidence in the markets. Recently completed IPOs have received overwhelming response in both primary and secondary markets, which is quite encouraging,” Lunawat said.
“In the past, it is proved that SME companies give good return on investment. This is one of the major reasons behind increasing participation of investors,” he added.
Recently, leading fund house Reliance Mutual Fund has invested in the public issue of Valiant Organics. Besides, Edelweiss has participated in the recently concluded IPOs of Comsyn, Sakar Healthcare and Nandini Creation.
“In fact, banks, and mutual funds have started looking positively at SME stocks though participation is still below the desired level. Banks and mutual funds participated in the scrips of Ashapura Intimates Fashion and Moami Apparels at primary and secondary level,” Lunawat said.
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