The surge in public share sales of small and medium enterprises (SMEs) in 2024 has created a buzz in the investment market. With a record 240 offerings and a total of ₹8,757 crore raised, this year has been the best yet for SME IPOs. The average size of these offerings was ₹36 crore, showcasing a growing interest in these smaller companies among investors.
One of the key highlights of SME IPOs this year has been the attractive returns that many of these companies have provided. Share prices of 27 companies soared over 100% on debut, with another 79 companies returning 50-100%. This has caught the attention of individual investors looking to make quick gains in the market.
Despite the potential for high returns, there is also a level of risk involved in investing in SME IPOs. With limited analyst coverage and information available about these companies, investors are advised to do thorough research before making investment decisions. It is crucial to assess the fundamentals of these firms and gauge the credibility of the promoters before investing.
In light of the growing popularity of SME IPOs, market regulator SEBI has introduced tighter rules for these offerings. Companies looking to make a public offering must now meet certain criteria, including having an operating profit of ₹1 crore from operations for any two out of three previous financial years at the time of filing their draft prospectus. Additionally, related party transaction norms that apply to listed entities on the mainboard will also be extended to SME firms.
Overall, the surge in SME IPOs in 2024 reflects a growing interest in smaller companies among investors and the potential for attractive returns in this segment of the market. As always, investors are advised to conduct thorough research and due diligence before investing in any IPO, particularly in the SME sector where risks may be higher due to limited information available.
