Small and medium enterprises are firing all guns in the primary market even as their big brothers are waiting in the wings to tap the main board till a clarity on current economic uncertainty emerges before taking the plunge.
Braving precariously poised domestic and global economies, about 15 SME companies will tap the market with initial public offering to raise over ₹384 crore this week ending September 30.
SMEs are looking to raise capital from the primary market as the funding from private equity and other institutional investors is drying up fast due to consistent increase in interest rates both in India and overseas.
Of the 15 initial offers , two will be on NSE Emerge and the remaining on BSE SME. The issue of Pace e-Commerce Ventures and Swastik Pipe, which opens on Thursday, would be among the largest raising ₹67 crore and ₹63 crore, respetively, . The smallest issue of Cargotrans Maritime would mop up ₹5 crore.
Ambareesh Baliga, a leading SME IPO analyst, said the buoyancy in SME IPO market can be traced back to some of the issues that had delivered excellent returns in short span of two months of listing.
Merchant bankers have been convincing promoters of these companies to tap the SME platform instead of raising debt. Promoters are also given into the thought of family stakeholding and valuation rising multi-fold after listing, said Baliga who had his previous stint with Kotak, Karvy and Edelweiss.
There were 35 SMEs issues so far this year against 27 in the whole of last year and most of them have been run-away hit.
The SME IPO of Kolkata-based Annapurna Swadisht — which closed on September 19 — was subscribed 190 times by investors. The IPO received bids for ₹3,835 crore against issue size of ₹30.25 crore. The price band of the IPO was at ₹68-70 per share.
EB Biocomposites, which was issued at ₹126 on September 13, closed at ₹248 on Friday delivering a return of 122 per cent, while Jayant Infratech has more than trebled to ₹393.
Suddenly there has been a market frenzy for these kind of issues among investors who want to make quick buck as the offerings in the main board dry up. Of course, this does not mean that all SME issues should be looked upon with suspicion, said Baliga.