Should you beware of the SME IPO frenzy?


Fears of a global slowdown and a weak macroeconomic outlook have not deterred India’s small and medium-sized companies from entering the primary market this year.

Despite sour sentiment in secondary markets, 87 SMEs have launched their initial public offerings so far in calendar year 2022, raising Rs 1,460 crore against Rs 783 crore raised by 56 such companies last year.

In the first half of the current financial year, 62 SME IPOs hit the streets raising a total of Rs 1,078 crore compared to 30 IPOs in the same period in 2021-22 which raised Rs 346 crore, the data showed. PRIME Database data.

Analysts attribute this to a healthy domestic economy and liquidity conditions that have kept equity markets afloat in recent years.

According to G Chokkalingam of Equinomics Research, the share of SMEs in total market capitalization is less than 1% and the market will see a couple of thousand SMEs listed in the next five years.”

“These companies are very diversified and their performance would vary, but the wealth creation would be huge, as we have seen many of these companies become large companies in the past,” says G Chokkalingam, founder and CIO of Equinomics Research.

However, experts advise caution against the SME IPO frenzy amid looming risks of a global recession.

With over 40% of India’s exports led by small and medium-sized companies, the ongoing slowdown in world trade creates uncertainty for these domestic export players.

According to Kotak Securities, the US and major European economies account for nearly 50% of MSME exports. The impact on the production side would be felt through manufacturing, wholesale and retail. If the global situation worsens and materially affects MSMEs, it could also slow credit and increase pressure on asset quality.

In addition, analysts are wary of the record returns that SMEs have been generating in the market.

Nine small and medium-sized companies made a stellar debut on the stock market on October 10 and some of the accountants even doubled in value. Six of these nine held on to the pop of the chart just barely.

speaking to commercial standardAmbareesh Baliga, an independent market analyst, says that a number of SME stocks have become multi-listed. Investors flock to these themes to make easy money. This is causing foam to form in this space. I’m not sure how long this frenzy will last.

Today, the trajectory of the market will be guided by global signals, domestic corporate earnings of companies, and how the rupee develops.


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