SME IPO Listing Gains Surge in 2024 Despite Regulatory Concerns

New Delhi, Sep 9 (KNN) The average listing day gains from small and medium-sized enterprises (SMEs) initial public offerings (IPOs) have nearly doubled in 2024, reaching 72 per cent, compared to 37 per cent in 2023.

This surge comes despite warnings from market experts and regulators about potential risks, reported FE.

More SME stocks have listed with over 100 per cent premium gains on their debut day, while fewer have closed below their offer price in 2024 compared to the previous year.

According to data from PRIME Database, of the 172 stocks that debuted on the SME platforms of the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) this year, 29 provided returns of over 100 per cent on their first day.

In contrast, 17 out of 179 SME stocks achieved such gains in 2023. Additionally, only 11 stocks fell below their offer price on their debut in 2024, compared to 30 in the previous year.

Infrastructure and renewable energy companies have dominated the top-performing IPOs, with five out of the top ten first-day gainers in 2024 hailing from these sectors.

Notable companies such as Winsol Engineers, Kay Cee Energy & Infra, GP Eco Solutions India, and Divine Power Energy saw stock prices surge between 280 per cent and 420 per cent on their first trading day.

Even in the broader market, infrastructure and power companies have experienced strong performances, supported by a favourable domestic economic environment.

However, market experts have raised concerns about the sustainability of such extraordinary gains in the SME segment.

G. Chokkalingam, Founder, Equinomics Research, cautioned that stock prices must eventually align with company fundamentals.

He emphasised the importance of analysing the business model and financial strength of SMEs, particularly when stocks are trading at high price-to-earnings (PE) multiples.

The Securities and Exchange Board of India (SEBI) has expressed similar concerns, warning that certain SME companies and their promoters may be engaging in practices that create an unrealistic picture of their operations, potentially inflating stock prices.

SEBI has been actively monitoring these developments and has taken action against some companies and promoters for market manipulation.

Chokkalingam advised investors to exercise caution, particularly when purchasing shares post-listing.

While the risk of securing an IPO allocation is limited, he noted, the risk significantly increases when buying in large quantities after the stock is listed.

SEBI has been issuing warnings about manipulation in SME stock prices for nearly a year and continues to monitor the sector closely.

(KNN Bureau)