Small and medium enterprises (SMEs) in India have seen a surge in interest from family offices and high-net-worth individuals (HNIs) this year. With strong participation from these investors, along with favorable market liquidity and optimistic sentiment, 139 SMEs have raised Rs 3,540 crore through initial public offerings (IPOs) in 2023 so far, according to data from primedatabase.com. This is higher than the 109 companies that raised Rs 1,875 crore through IPOs in the whole of 2022.
Experts believe that the fundraising environment for SME IPOs will remain favorable going forward. Factors such as sector-specific growth potential, market liquidity, investor sentiment, and potential regulatory changes will continue to drive the robust fundraising momentum. “The convergence of these influential factors is expected to buoy the fundraising momentum,” said Abhishek Jain, Head of Research at Arihant Capital Markets Ltd.
A total of 139 IPOs have debuted on the SME platforms of BSE SME and NSE Emerge this year, raising Rs 3,540 crore as of October 20. Two more SMEs, Paragon Fine and Speciality Chemical, and On Door Concepts are scheduled to open their maiden public issues next week. These IPOs have been from various sectors including IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality. The funds raised through these IPOs will be used for expansion plans, working capital requirements, and debt repayment.
The significant increase in SME fundraising through IPOs can be attributed to the participation of family offices and HNIs, injecting substantial capital into the SME market. “The upward movement in the markets, good liquidity, and businesses scaling up are some reasons for the whopping growth in fundraising. There is a huge demand for capital, and many companies are taking advantage of these favorable market conditions to raise funds from the public market,” said Himanshu Kohli, Co-founder of Client Associates. Additionally, there is a high demand for offers for sale as investors look to unlock value and exit their investments.
In terms of monthly performance, September recorded the highest number of 37 SMEs entering the IPO market. The largest IPO this year was Spectrum Talent Management, raising Rs 105 crore, followed CFF Fluid Control, which raised Rs 86 crore.
The BSE and NSE launched SME platforms in 2012, becoming the only two bourses in India to offer such a segment. These platforms provide opportunities for SMEs to raise capital for growth and expansion.