The SME IPO in India has become a game changer for small and midsize businesses. It is providing them with opportunities to raise growth capital at reasonable valuations. They have faced challenges from the Covid-19 pandemic and geopolitical crises. Still, they are key drivers of the economy, creating jobs and fostering innovation.
SME IPO empowers small businesses, boost employment, and drive innovation. These factors make them a vital force in India’s economic resurgence.
SMEs are looking to access the capital markets for expansion and growth prospects. IPOs have become a popular means of funding and gaining access to a larger investor base. In 2022, there was a significant increase in SME IPOs. They had 109 offerings raising a total of Rs 1,980 crore compared to 59 IPOs raising Rs 787 crore in 2021.
This trend continues in 2023. They had 49 offerings raising Rs 930 crore. This is almost nine times the capital raised by five mainboard issuances in the same period.
Read more on AccelerateBS IPO.
The success of SME IPO is due to various factors. These are regulatory reforms and greater trust in transparency and governance. IPOs allow cash-generating SMEs with a post-issue paid-up capital of Rs 1 to Rs 25 crore. They need positive operating cash flows for the preceding two years also.
Investors have shown interest in SME IPOs, with 33 out of 49 stocks trading above their offer price. Investing in SMEs carries inherent risks. This is due to their limited operational presence and smaller market capitalization. Thorough assessments of business prospects, and corporate governance are crucial for investment decisions.
As India’s economy recovers, SME IPO might play a role in driving economic growth in the country. The increasing appeal of SME IPOs is a testament to their potential.
