In a testament to the robust fundraising environment in India’s small and medium enterprise (SME) sector, 139 SMEs have collectively mobilized an impressive sum of Rs 3,540 crore through initial public offerings (IPOs) in 2023. This notable achievement is credited to a confluence of factors, including active participation from family offices and high-net-worth individuals (HNIs), buoyant market liquidity, and an optimistic investor sentiment.
The substantial success in raising capital through IPOs by SMEs in 2023 has exceeded the performance of the entire year of 2022, during which 109 companies raised Rs 1,875 crore through IPOs, according to data from primedatabase.com. Market experts anticipate the favorable fundraising environment for SME IPOs to continue, underpinned by key factors, including sector-specific growth potential, market liquidity levels, investor sentiment, and potential regulatory changes.
Abhishek Jain, Head of Research at Arihant Capital Markets Ltd, explained, “The robust fundraising momentum is expected to persist, buoyed by the convergence of these influential factors.”
As of October 20, 2023, a total of 139 IPOs have made their debut on the SME platforms, specifically the BSE SME and NSE Emerge, raising a cumulative total of Rs 3,540 crore. Furthermore, two more SMEs, Paragon Fine and Speciality Chemical and On Door Concepts, are slated to launch their maiden public issues in the upcoming week. These SMEs represent a diverse array of sectors, including IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality. The funds raised through these IPOs will be allocated for expansion plans, supporting working capital requirements, and debt reduction.
The remarkable upswing in SME fundraising through IPOs in 2023 can be attributed to the significant capital injection by family offices and HNIs into the SME market, noted Abhishek Jain. Himanshu Kohli, Co-founder of Client Associates, explained, “Some reasons for the whopping growth in fundraising are the upward movement in the markets, the liquidity has been good, and businesses are scaling up. As a result, there is a huge demand for capital. Additionally, there is a lot of demand for offers for sale because investors who had invested in those companies before are considering unlocking value and wish to exit through this route right now.”
Breaking down the data by month, September witnessed the highest number of 37 SMEs entering the IPO market. The largest IPO of the year was conducted by Spectrum Talent Management, raising Rs 105 crore, followed closely by CFF Fluid Control, which garnered Rs 86 crore.
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The BSE and NSE launched SME platforms in 2012, establishing themselves as the only two bourses in India to offer such a dedicated segment for SMEs.
