Data sourced from Prime Database show that 152 SME IPOs have been launched this year with an average issue size of ₹33 crore and an average oversubscription of nearly 200 times. Of the total, 18 were oversubscribed more than 400 times. For instance, the ₹5-crore IPO of Hoac Foods India was oversubscribed 1,963 times this May. Similarly, the ₹6.6-crore IPO of Magenta Lifecare was oversubscribed over 1,000 times.
The data show that for every mainboard IPO, around three SME IPOs have been launched in each of the last three years. A total of 45 mainboard IPOs have been rolled out so far this year with an average issue size of ₹1,074 crore and average oversubscription of 43 times.
The runway rally in the Indian stock market since the abatement of the Covid-19 pandemic has been fuelling strong speculative interest in small-sized SME IPOs.In the past three years, SME IPOs have broadly outperformed mainboard IPOs in terms of oversubscriptions, listing gains and postlisting returns.For instance, 182 SME IPOs were launched last year with an average oversubscription of 86 times, average listing gains of 36% and average stock returns of 216%. In contrast, 57 mainboard IPOs were launched with an average oversubscription of 32 times, average listing gains of 29% and post-listing gains of 216%.Incidentally, the average listing gains of SME IPOs have been steadily rising over the past three years. From an average listing gain of 2.2% in 2019, the average listing gains for the SME IPOs have climbed up to 74% in 2024.
The lure of handsome listing gains along with robust post-listing stock performance on low investment has ensured sustained investor interest in SME IPOs notwithstanding the nature and size of the underlying businesses.
Market regulator Sebi has urged stock exchanges to be more cautious when approving SME IPOs — asking them to increase due diligence even if it slows down the approval process in a bid to protect investor interest.
For now, SME IPOs seem to be the new penny stocks fuelling speculative interest in a rallying stock market.