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BSE SME IPO index surges 53%, outperforms broader market

LiveMint logoLiveMint 04-06-2017 Nasrin Sultana

Mumbai: Shares of companies that listed in the one year ending 2 June on the BSE’s platform for small and medium enterprises (SMEs) have gained more than those that listed on the main exchange, data shows. The S&P BSE SME IPO index gained 52.85% in the year ending 2 June while the BSE IPO index gained 40.22% and the BSE smallCap index rose 36.76%. During this period, the benchmark Sensex rose 16.50%.

BSE SME IPO index measures performance of SMEs listed via IPOs on the BSE SME platform for a period of one year. BSE IPO index tracks current primary market conditions in the Indian capital market and measures growth in investor wealth for one year after IPO. 

Analysts said there is growing appetite for IPOs of SME companies due to reasonable valuations, strong returns and firm growth trajectories. Gaurav Jain, director, Hem Securities Ltd said, “Those listed on SME platform are perceived as growing companies and are very much akin to the India Shining story. India is a country of SME companies and awareness created by the exchanges about growth opportunity in these companies is attracting investors.”

Nikhil Khandelwal, managing director, Systematix Shares & Stocks said awareness of the SME ecosystem has aided in attracting investors while good quality IPOs on the platform is adding to credible growth. “As the markets are rallying, stocks listed on main exchange are getting expensive and offer only limited options. Investors are getting reasonably valued companies on the SME platform with firm growth trajectory,” he said. 

According to data compiled by Delhi-based research company Prime Database, 44 SME IPOs got listed on the exchanges raising Rs553.65 crore so far till May 2017. In the same period, only eight IPOs were seen on the main exchange, which together raised Rs6,335.93 crore.

In 2016, which was a bumper year for IPOs, 67 companies listed on the SME platform raising Rs537.27 crore, while 26 companies listed on the main board raising Rs26,493.84 crore.

“Investor participation has increased manifold in the SME space,” said Mahavir Lunawat, managing director, Pantomath Capital Advisors. 

“Over 200 companies are listed on SME exchanges in India and have raised more than Rs2,100 crore through IPOs, which have current market cap of around Rs22,000 crore which is by far the largest return any exchange has given in a span of five years. SME Exchange in India is the fastest growing exchange globally. Average IPO size has also increased from Rs7-8 crore to more than Rs10 crore,” Lunawat said.

Of the 44 stocks currently constituting the BSE SME IPO index, the mean market capitalization is Rs41.75 crore while the largest market capitalization is Rs184.89 crore.

According to BSE data, 183 companies have listed so far on the BSE SME platform since August 2012, out of which 29 have migrated to main board while three have been suspended. Companies which have migrated to the main board include Suyog Telematics Ltd, Kushal Tradelink Ltd, SRG Housing Finance Ltd, Jupiter Infomedia Ltd, Ashapura Intimates Fashion Ltd, Oceanaa Biotek Industries Ltd and Dhabriya Polywood Ltd, which have seen their market cap increasing 2,315.02%, 5,680.14%, 1,314.94%, 941.04%, 718.42%, 718.42% and 872.92% respectively since listing.

However, eight companies which have migrated to the main board have seen an erosion in market cap, including Bronze Infra Tech Ltd (91.78%) Anshu’s Clothing Ltd (88.35%) and VCU Data Management Ltd (60%).  

Since its launch in August 2012, BSE SME IPO is up a whopping 1,211.36%, while BSE IPO index jumped 192.23% and BSE Sensex gained 77.11%. 

On the National Stock Exchange SME platform Emerge, 59 companies have been listed since 2012. Some of the big IPOs on the NSE Emerge are Zota Healthcare Ltd which raised Rs58.50 crore and Euro India Fresh Foods Ltd which raised Rs51.26 crore.

Analysts said apart from overwhelming retail response, SMEs have also witnessed participation from high net worth individuals (HNIs) and institutional investors like DSP Black Rock Mutual Fund and Reliance Mutual Fund. 

SIDBI and DSP BlackRock Mutual Fund invested in the IPO of Ashapura Intimate Fashions Ltd, Union Bank in Agro Phos India Ltd and Reliance Mutual Fund in Valiant Organics Ltd. DSP BlackRock Mutual Fund has also invested in Momai Apparels Ltd. Bohra Industries Ltd saw foreign institutional investors’ participation as well. 

“Stocks listed on SME exchanges have given fruitful returns. This reflects the growth and development of the SME capital market in true sense, building the investors’ confidence and reassuring the long terms benefits of SME bourses for development of SMEs,” Lunawat added. 

With more companies waiting to go public, analysts expect the SME IPO segment to see continued growth.

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