Investors in small and medium enterprises’ initial public offerings laugh all the way to bank after tripling and quadrupling their investments in matter of 10-15 days, even as exchanges plan to tighten norms.
The three SME IPOs—Winsol Engineers, Refractory Shapes, and TGIF Agribusiness—were listed at a huge premium last week on NSE Emerge and BSE SME Exchange.
Winsol Engineers made a bumper debut with the shares listing at ₹365 a piece on NSE Emerge against the issue price of ₹75, delivering a return of over four times. The company’s share closed at ₹422 on Friday.
With a lot size of 1,600 shares, an investment of ₹1.20 lakh would have fetched ₹5.84 lakh, if one had sold on listing and ₹6.75 lakh if held till the weekend.
Incidentally, the entire gain was earned in 8 days, as the bidding for Winsol Engineers’ IPO began on May 6, and shares were listed on May 14.
Nevil Savjani, Director of Beeline Capital Advisors, said the runaway returns on the SME platform show increased investors’ interest in the SME segment, which is evident from the recent issues subscription numbers.
He said the success of IPOs on the SME platform is mainly due to good companies coming at attractive valuations compared to the main board.
SME shining
Aided by favourable government policies, MSME companies are raising fresh capital to meet the growing demand due to the Make in India push. Foreign companies mostly prefer dealing with listed entities than family-run businesses.
Incidentally, long-term investors in select SMEs are also rewarded for their patience. The market cap of Holani Consultants advised Insolation Energy, which hit the capital market in October 2022t, has zoomed to ₹4,500 crore on Friday. The company’s share price has rallied to ₹2,098 a piece from the IPO issuance price of ₹38 a share.
Exchanges, which regulate IPOs on SME platforms, plan to prescribe a minimum issue size of ₹30-50 crore to increase the float and protect investors’ interests.
A frequent SME IPO investor, Sanjay Matre feels that exchanges have to bring transparency to the allotment process. Due to the huge over subscription, investors get shares only in 3 out 10 IPOs applied for.
Though the number of issuances will come down initially due to the tightening of norms, Savjani said it will protect investors’ interests. In a high bull market, investors get carried away, and the new norms will act as a qualitative filter.