Minting multibaggers amid complaints & probes: How 2024 fared for Indian SME IPOs

Despite all the controversies, scrutiny and probes, 2024 turned out to be a landmark year for the Indian SME companies. Amid the going flurry IPOs as many as 243 issues launched their IPOs in the current calendar with 240 names already making their debuts, while other three shall be listed soon.

On an average, more than 20 IPOs were launched every month. This means more than about one issue every trading session, if one considers 200 trading sessions in a year. These 243 SME IPOs raised about Rs 8,700 crore, net of their anchor books, making 2024 another historic year in terms of raising funds.

2024 proved to be a defining one for SME IPOs, marked by turbulence yet significant growth. This year had it all, from great highs to struggles to stay strong. Despite challenges stemming from stricter regulations and allegations of market manipulations, the SME IPO segment demonstrated remarkable resilience and strength, said Kresha Gupta , Founder & Director, StepTrade Share Services.

"2024 saw 243 SME companies raising funds almost double the previous year’s fundraising, but one of the standout trends in 2024 was the notable increase in anchor participation, with around 68 per cent of SME IPOs attracting anchor investors, including prominent names from leading funds," she said.

As many as 166 SME debutants managed to deliver listing gains to the investors, while 70 issues disappointed at the listing. However, the remaining issues listed at par. Interestingly, 214 SME issues ended their maiden trading session with gains, while only just 22 settled with cuts on the first day of trading.

Retail investors drove the demand for IPOs, particularly in the SME segment, where oversubscription is becoming a common occurrence, said VLA Ambala, Co-founder at Stock Market Today. Adding to her notion, Praneet Singhal, Director - Financial Investor at 1Lattice said that the SME IPO segment performed more impressively, with two-third IPOs delivering listing pop.

Of these 240 SME IPO listings so far, 66 issues were listed on the SME platform of BSE, raising a total of Rs 1,971 crore (net of anchor book basis). On the other hand, as many as 177 SME IPOs made their debut on emerge platform of NSE. These companies raised more than Rs 6,700 crore on a net-anchor book basis.

The year saw as many as 10 SME IPOs raising more than Rs 100 crore, including Property Share REIT, the first-ever SME REIT issue in India, which raised more than Rs 350 crore via primary stake sale. Sar Televenture, Danish Power, KP Green Engineering, Sahasra Electronic, Ganesh Green, Rajesh Power, Tunwal E-Motors and Petro Carbon were other Rs 100 crore plus SME IPOs.

Five more SME IPOs raised more than Rs 90 crore, while the total number of SME IPOs with an issue size of more than Rs50 crore stood at 52. On the other hand, more than two dozen IPOs raised less than Rs 10 crore and the average SME IPOs size for 2024 stood close to Rs 35.7 crore. 90 IPOs raised more than the average issue size.

Amid the buzz of manipulation in the SME space, stricter regulations, such as limits on OFS selling by promoters, extended lock-in periods, and the newly introduced profitability criterion of Rs 1 crore EBITDA for listing, have made both investors and promoters more cautious.

The SMEs in India grew a lot in the year 2024, but so did their problems. Investors were definitely interested in SMEs, but with some skepticism thanks to compliance lapses, legal irregularities and lack of valid records, said Suresh Mansharmani, Co-Founder at Tajurba Business Network.

According to Steptrade's Gupta, robust due diligence from investors to mitigate risks, understanding of market cycles, stricter compliances and cctive analysis of investments with deep understanding of the fundamentals are the key learnings from 2024.
 

In terms of regulatory action, Sebi's cautious stance on SME space continued amid the euphoria, while exchanges also took notice of several complaints on various issues and postponed the launch and listing of the issues. C2C Advanced Systems, Trafiksol ITS Technologies and Solar91 Cleantech being the latest examples.

The legal scrutiny will be better in 2025 with more companies seeking guidance for listing on the platforms. The stricter norms will filter out and SME IPOs with better quality, solid debt servicing, sound financial track record and strong corporate governance are expected to hit the street, Mansharmani from Tajurba said.

SME companies have demonstrated consistent revenue and profit growth, with several nearing the transition into the microcap and small-cap segments. The increased compliance standards and focus on profitability are expected to attract larger and more robust companies to the SME platform. This improvement in quality will further boost investor confidence, Kresha added.