NEW DELHI: Even as the initial public offer (IPO) of Resourceful Automobile Ltd on the SME platform of the BSE justifiably received attention for receiving nearly Rs 5,000 crore bids for Rs 12 crore issue, it is not a case in isolation.
Of more than 160-odd IPOs on the SME platforms of the NSE and the BSE in 2024, 109 of them have received bids 100 times the shares on sale. In a couple of cases, the bids crossed 1,000 times the shares on sale.
HOAC Foods India received 2013 times bids for its shares on offer in 2024. The company received bids for over Rs 10,000 crore for an issue size of 5.54 crore. Retail portion of the IPO got subscribed 2,556 times. Another company Kay Cee Energy and Infra received bids for Rs 16,765 crore for an issue size of Rs 15.65 crore. Retail investors bid 1311 times the shares reserved for them.
The craze for SME IPOs can be attributed to general euphoria in the primary market as to attractive pricing, and easier allotment process.
A senior investment advisor on condition of anonymity told TNIE the IPOs on the SME platforms are usually priced lower (below Rs 100-150), which is one of the main draws for retail investors. He said returns from IPOs have been good, and those miss out on IPOs in main board look for offers on SME platforms.
SME IPOs have given stellar returns with over 30 such IPOs giving over 100% returns on listing day. HOAC Food, for example, surged 190% its IPO price on listing day. The highest listing day gain among those listed this year was seen in Winsol Engineers, rose 411%.
However, high retail participation is a cause of concern, and experts advise caution.
For some SME IPOs, fear is that pricing decisions are not being made rationally, claims Utkarsh Sinha, MD , Bexley Advisors, a boutique investment bank firm. “Often, grey-market post-IPO performance is being factored into pricing decision, rather than basing it on performance fundamentals. That means the bankers involved might be pushing towards squeezing the last bit of value on the price,” he says.