Favorable market conditions, liquidity push 139 SMEs to mobilise Rs 3,540-cr via IPO in 2023

New Delhi: Strong participation of family offices as well as high-net-worth individuals (HNIs), adequate market liquidity, and optimistic investor sentiment have amplified interest in small and medium enterprise (SME) IPOs, with 139 such firms garnering Rs 3,540 crore through initial share sales in 2023 so far.

This was higher than 109 companies that raised Rs 1,875 crore through initial public offerings (IPOs) in the entire 2022, according to data provided by primedatabase.com.

Looking ahead, the fundraising environment for SME IPOs is anticipated to remain favourable, experts said.

"The primary determinants include the growth potential of specific sectors, market liquidity levels, investor sentiment, and potential regulatory changes. The robust fundraising momentum is expected to persist, buoyed by the convergence of these influential factors," Abhishek Jain, Head of Research at Arihant Capital Markets Ltd, told PTI.

Going by the industry data, a total of 139 IPOs have debuted on the SME platforms -- BSE SME and NSE Emerge -- and raised Rs 3,540 crore this year (till October 20). In addition, the maiden public issues of two more SMEs -- Paragon Fine and Speciality Chemical and On Door Concepts -- are scheduled to open next week.

These companies that came out with their maiden public issue belong to a wide range of sectors like IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality.

These firms have mobilised funds for expansion plans, support working capital requirements, and retire debt.

The remarkable surge in SME fundraising through IPOs in 2023 can be attributed to the participation of family offices and HNIs that injected substantial capital into the SME market, Jain said.

"Some reasons for the whopping growth in fundraising are the upward movement in the markets, the liquidity has been good, and businesses are scaling up. As a result, there is a huge demand for capital. And many companies are taking advantage of these favourable market conditions to raise capital from the public market," Himanshu Kohli, Co-founder of Client Associates, said.

Also, there is a lot of demand for offers for sale because investors who had invested in those companies before are considering unlocking value and wish to exit through this route right now, he added.

In terms of month, September saw the highest number of 37 SMEs hitting the IPO market. The largest issue this year was Spectrum Talent Management which mobilised Rs 105 crore, followed by CFF Fluid Control which mopped up Rs 86 crore.

Stock exchanges BSE and NSE launched SME platforms in 2012 becoming the only two bourses to offer such a segment in the country. These platforms provide opportunities for such firms to raise capital for growth and expansion.