SME IPOs: The new gold rush or a fool's gold?
Subscribe to enjoy similar stories. India's small and medium enterprises (SMEs) are flooding the stock market, raising billions through initial public offerings (IPOs). The surge in activity signals robust investor confidence, but beneath the surface, questions about market manipulation and the sustainability of this growth are emerging.
Could this wave of SME IPOs be a sign of strength, or are investors being drawn into a potential bubble? Read this | TrafikSol had a terrific IPO. Then BSE decided to postpone its listing. In recent years, SMEs have increasingly tapped into the stock market to fuel their growth, with public offerings typically ranging between ₹5 crore to ₹50 crore. What started as a trickle has now become a wave.
The average issue size of SME IPOs has more than tripled, soaring from ₹10 crore in 2020-21 to ₹36 crore in 2024-25. The momentum is staggering: between April and August 2024-25, 109 SMEs raised a staggering ₹3,983 crore—surpassing the funds raised in the entire financial years of 2020-21, 2021-22, and 2022-23 combined. The IPO issuance pace has averaged nearly one per working day.
While 2023-24 also saw record activity, with ₹6,265 crore raised across 203 SME IPOs, the question remains whether the market can sustain this level of growth without tipping into instability. The flood of SME IPOs, while a sign of confidence, has also sparked concerns. Chief among them is the extreme oversubscription of some IPOs—sometimes by thousands of times the initial amount sought—raising questions about the market's long-term sustainability.
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