Strong participation from family offices and high-net-worth individuals (HNIs), along with favorable market conditions and optimistic investor sentiment, have driven interest in small and medium enterprise (SME) IPOs. According to data from primedatabase.com, 139 SMEs have raised Rs 3,540 crore through initial share sales in 2023, surpassing the 109 companies that raised Rs 1,875 crore in the entirety of 2022.
Experts predict that the fundraising environment for SME IPOs will continue to be favorable. Factors contributing to this positive outlook include the growth potential of specific sectors, market liquidity levels, investor sentiment, and potential regulatory changes. Abhishek Jain, Head of Research at Arihant Capital Markets Ltd, stated, “The robust fundraising momentum is expected to persist, buoyed by the convergence of these influential factors.”
A total of 139 IPOs have debuted on the SME platforms of BSE SME and NSE Emerge this year, raising Rs 3,540 crore as of October 20. Additionally, two more SMEs, Paragon Fine and Speciality Chemical and On Door Concepts, are scheduled to open their maiden public issues next week. These IPOs cover various sectors, including IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality. The funds raised from these IPOs will be used for expansion plans, working capital requirements, and debt repayment.
The substantial increase in SME fundraising through IPOs can be attributed to the involvement of family offices and HNIs, who have injected significant capital into the SME market. Himanshu Kohli, Co-founder of Client Associates, explains, “The upward movement in the markets, good liquidity, and scaling up businesses are some of the reasons for the impressive growth in fundraising. As a result, there is a high demand for capital, and many companies are taking advantage of these favorable market conditions to raise funds from the public market.” He further notes that there is also a demand for offers for sale, as investors seek to unlock value and exit through this route.
September recorded the highest number of SME IPOs, with 37 companies entering the market. The largest IPO this year was Spectrum Talent Management, which raised Rs 105 crore, followed by CFF Fluid Control, with Rs 86 crore. BSE and NSE introduced SME platforms in 2012, becoming the only two exchanges in the country to offer such a segment. These platforms provide growth and expansion opportunities for SMEs seeking to raise capital.
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