SME IPOs and companies in this space have been buzzing lately on Dalal Street and a fund manager from StepTrade Share Services, which recently launched its SME-focussed Portfolio Management Services (PMS), gave his mantra to investors in companies from this space.
Ankush Kumar Jain, Director and Fund Manager at StepTrade Share Services said that he bets on SME companies based on the three key factors- consistent profitability of the company, at least for three years; order book growth and clientele placing the orders; and skin of promoters in the game. "If an SME company or IPO has three checkpoints, it is a buy for us," he said.
In the SME space, a total of 380 companies made their debut on Dalal Street between January 2021 to April 2024, of which 105 companies delivered multibagger returns on listing, surging 100 to 300 per cent. However, 132 companies have delivered negative returns on listing, while remaining 153 companies yelled positive returns less than 100 per cent.
StepTrade Share Services received the PMS license from the capital market regulator Sebi in March 2024. Under the StepTrade PMS kitty, StepTrade SME Fund strategy will be eying alpha returns in companies listed on SME exchanges, and the StepTrade Rising Star Fund, focusing on small & micro-cap companies.
The StepTrade SME Fund strategy targets high-growth, undervalued listed-SME companies with market capitalisations ranging from Rs 200 crore to Rs 2,000 crore. It will focus on companies poised for significant value unlocking through the potential to migrate to the mainboard within one or two years, capturing alpha during the value unlocking phases.
The StepTrade Rising Star Fund strategy aims to generate superior alpha by actively managing a portfolio of small and micro-cap listed equities. It will invest in companies with market capitalisations ranging from Rs 500 crore to Rs. 2,000 crore and have the potential for significant future growth.
While interacting with Business Today, Jain said he is bullish on solar, renewable or recycling segment players and infrastructure firms in the SME sector as companies in these businesses solve niche problems. He added that India's SME journey has just begun and there is more steam left in it.
On selecting Ahmedabad as its base, Jain said that a major chunk of SME IPOs is coming from Gujarat based companies and it becomes easier for him to meet and understand the business and promoters' vision. On the Sebi's recent strictness on the SME sector, he said that regulators are vigilant to provide a safe environment for all stakeholders in the SME space, which shall be lauded.
Jain cautioned that investors follow herd mentality and are jumping to SME space to make a quick buck without due-diligence. "Investors should look at the companies where QIBs have participated and pick companies based on financials, promoters background and growth potentials for the future, instead of taking a punt for short term or listing gains," he suggested.
Earlier, StepTrade Share Services launched the Chanakya Opportunities Fund, its first CAT II AIF Fund, in July 2023, followed by the launch of the StepTrade Revolution Fund, a CAT III AIF Fund, in September, 2023.
Commenting on the PMS launch in an event in Ahmedabad, Kresha Gupta, Director, StepTrade Share Services, said, “We are thrilled to introduce Portfolio Management Services as a new vertical of StepTrade Share Services. The launch of PMS reflects our commitment to excellence in financial services and allows additional investment avenues for our clients.
(Disclaimer: The reporter was hosted at Ahmedabad, Gujarat, by StepTrade)