SME IPOs Outshines Mainboard Firms In Listing Gains

Mumbai, Nov 21 (KNN) The small and medium-sized enterprises (SMEs) IPOs have outperformed mainboard companies in terms of listing gains in the past one year, but market experts have advised investors to take an informed decision while picking SME IPOs and invest only in quality businesses, as a rising tide lifts all boats, reported Mint.

SME IPOs have listed with a median gain of 12.1% on their offer price, compared to 8% for mainboard IPOs, reported Mint. 

Their median annualized returns since listing is 61%, higher than the 52% for mainboard IPOs. Moreover, the BSE SME IPO index has also outperformed the BSE IPO index, returning 123% in the past year, compared to 36% for the latter.

SME stocks that were listed a maximum of three years ago are included in the BSE SME IPO index, and the BSE IPO index includes mainboard stocks that were listed a maximum of a year ago.

However, around 40% of the 169 SME IPOs considered in the analysis have lost share value since listing, while the share is 28% for the 50 mainboard IPOs.

This reflects the caution that investors need while investing in SME IPOs based on short-term bull runs. The analysis covered all IPOs from the one-year period since 17 November 2022.

“In bullish markets, the relatively smaller size of the issue and low liquidity can turn out to be an advantage especially if demand is higher than supply of promising offerings from quality companies. A similar trend was seen in SME IPOs during the year 2016/2017 wave but it did not end well for many retail investors,” said Gaurav Dua, SVP & head Capital Market Strategy, Sharekhan by BNP Paribas.

“There have been some very interesting and promising businesses that have got listed through the SME platform. So rather than chasing short-term listing gains and chasing the momentum, it would be better to do your homework and be very selective while investing in SME IPOs,” he said.

(KNN Bureau)