SMEs' mop up from public share sales jumps 4x to Rs 965 cr in FY22

The amount is still far lower than the record Rs 2,213 crore mopped up in FY18 and Rs 1,620 crore collected in FY19

Collections from public share sales of small and medium enterprises (SMEs) saw a resurgence in the financial year 2022 after seeing a lull in the previous two financial years in the aftermath of the pandemic.

SMEs have mopped up Rs 965 crore from 70 offerings in FY22, nearly four times the amount garnered in FY21 from 28 offerings. This is still far lower than the record Rs 2,213 crore mopped up in FY18 and Rs 1,620 crore collected in FY19.

According to experts, the number of issuances dropped in FY21 as investors preferred larger companies that were deemed to be more resilient amid the pandemic rather than risking their capital on smaller names. The return of risk-on sentiment has aided their cause.

Top gainers this year include BEW Engineering (a gain of 1,520 per cent over issue price), Kotyark Industries (676 per cent) and DU Digital Technologies (410 per cent), according to primedatabase.com. Overall, 60 per cent of the SME IPOs listed this fiscal have given positive returns.

AA-Plus Tradelink, Nidan Laboratories & Healthcare, Brandbucket Media & Technology and Dynamic Services & Security were among the top losers, shedding between 61 per cent and 69 per cent.

Despite the possibility of high returns, experts said there was a chance of losing one’s entire capital in SME stocks. Analysing these firms could be tough because they are not tracked by analysts and there is limited data in the public domain. Investors are left to themselves when it comes to gauging the credibility of promoters. The SME segment has also been grappling with lack of liquidity and lacklustre institutional participation.

A few months back, India’s oldest bourse BSE signed a MoU with HBF Direct, a management consultancy that offers advisory services to SMEs, to encourage and promote listing of MSMEs and start-ups across India. “At a time when small businesses are slowly recovering from the economic impact of Covid-19, equity funding can be of paramount importance. By leveraging existing client base of HBF Direct Ltd, this MoU will help us in reaching out to SMEs and Start-ups across diverse sectors and shall also open up future possibilities of collaborative effort to increase the awareness around benefits of listing amongst SMEs and Start-ups spread across India, thereby enabling more and more businesses to avail benefits of equity financing,” said Ajay Thakur, Head - BSE SME & Startups.

The BSE and the NSE had launched separate SME platforms in 2012 and 2013, after the Securities and Exchange Board of India (Sebi) came up with easier listing and disclosure guidelines to help small companies tap the capital market.

Besides improved transparency, an IPO route for SMEs reduces their dependence on debt financing and helps them maintain their debt-equity ratio efficiently, said experts. Listed SMEs with good ratings are able to get loans at lower interest rates than the market.