Small companies take IPO street by storm, draw investors

Notwithstanding the turmoil in the stock market, September has seen record fund raising by small companies, the highest ever in a month since the launch of the small and medium (SME) platform in 2012.

In September, 30 initial public offering (IPOs) hit the SME platform compared to five in August as investor appetite for potential winners among unknown names are prompting companies to flood the market with issues. Of the 30 issues, 21 have already concluded. Over the next two days, 9 more will raise funds on the SME platform.

With increasing participation of institutional and wealthy investors in the recent SME IPOs, more small companies eyeing a listing, said bankers. "With the backing of qualified institutional buyers (QIB), the confidence of retail and high netwoth investors (HNI) investors has strengthened. So, there is a huge demand for SME IPOs" said Mahavir Lunawat, group MD, Pantomath Group, which has handled the maximum number of SME IPOs.

SME stocks have yielded superior returns since its inception. S&P BSE SME IPO index has returned 37.50 per cent every year since 2012. Lexus Granito, MRSS, Vidli and Madhav Copper have been among the best performers.

"General increase in awareness in the last one year and good traction among high networth and institutional investors from both foreign and do mestic is the main reason for such a rush in SME IPOs" said Ravi Varanasi, chief of business development, NSE.

The market capitalisation of all companies on the SME platforms of BSE and NSE stands at Rs 23,000 crore. Over 197 SMEs are listed on the BSE platform and 80 on the NSE. Between January and August this year, 72 SMEs have raised about Rs 820 crore as against to '537 crore raised by 67 companies for calendar 2016.



Institutional investors, too, are gradually warming up to SMEs. QIB participation saw a record in the IPO of Lexus Granito. SIDBI and DSP BlackRock Mutual Fund invested in Ashapura Intimate Fashions and Momai Apparels, Union Bank of India invested in Agro Phos and Reliance Mutual Fund invested in Valliant Organics.

FPIs invested in Bohra Industries & Lexus Granito. Large brokerage houses have also picked up blocks of shares in the IPOs of Worth Peripherals, MRSS, MD Inducto Cast, Maheshwari Logistics and Nandini Creation.