Investors are showing more confidence in the stock market, especially when it comes to small and medium enterprise (SME) initial public offerings (IPOs). These IPOs, known for their lower price bands compared to bigger offerings, are attracting a lot of interest from retail investors who see them as opportunities for significant returns in the future.
Even though only a small portion of shares in SME IPOs are allocated to retail investors, many still try to buy them in the secondary market after missing out on the IPO. This demand often drives up the prices of newly listed stocks, turning them into big winners in a short time.
The success of SME IPOs is not just good news for the companies going public but also reflects positive sentiments about the economy and supportive regulations that encourage more companies to enter the stock market.
This surge in IPO activity is also evident in the performance of the S&P BSE IPO index, which has seen a 62% increase over the past year, surpassing the 21.6% gain of the S&P BSE Sensex.
In 2024 alone, 130 companies have debuted on the stock market, with 99 of them being SMEs. Among these SMEs, an impressive 57% saw their subscription rates soar by over 100%.
Notable Performers
For instance, HOAC Foods India saw its IPO oversubscribed by a staggering 1834 times, while Kay Cee Energy & Infra had a subscription rate of 959 times. Maxposure and Greenhitech Ventures also attracted significant interest, with subscription rates of 904.9 times and 729 times, respectively.
Looking at the top performers, Owais Metal and Mineral Processing stands out with its shares trading at ₹1,259, a whopping 1348% higher than its IPO price. On the other hand, MVK Agro Food Product emerges as the top underperformer, with its shares trading 63.6% below its IPO price.
Before investing in SME IPOs, it’s crucial for investors to carefully study the IPO prospectus, understand the risks involved, and consider seeking advice from a financial advisor. While SME IPOs can offer significant rewards, they also come with higher risks due to the smaller size and less-established nature of the companies.
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