Will NSE's new rule for SME IPOs curb speculation or hinder growth?
Mint analysis of data, sourced from primedatabase.com for 281 SME IPOs listed on NSE since 2021, revealed that around 43% of these small businesses saw healthy gains on the listing day, with their closing prices up to 40% higher than the offer prices. Around a quarter of these firms saw gains between 40% and 90%, and nearly 20% soared over 90%. A strong investor appetite fuelled these gians.
However, not all IPOs were a success story. Around 14.6% of the companies experienced losses on their listing day compared to the offer price. Of the 20% of SME firms that made a phenomenal market debut, shares of around 88% are trading at 90% above the issue price.
“The NSE's new rule limiting SME IPO opening prices may impact capital raising and valuations. While intended to curb excessive speculation, this 90% cap could potentially reduce initial investor enthusiasm and first-day gains," said Atul Parakh, chief executive at online investment and trading firm Bigul. “This might make SME IPOs less attractive to some investors, potentially affecting demand and the amount of capital companies can raise." The new rule could, however, result in more stable post-listing performance and realistic valuations, Parakh acknowledged.
"Companies may need to price their IPOs more conservatively to ensure adequate investor interest. Overall, this rule may encourage a more measured approach to SME listings, balancing growth potential with market stability," he added. Their phenomenal journey could also be captured in the meteoric rise of the Nifty SME Emerge Index which is designed to reflect the performance of a portfolio of eligible small and medium enterprises.
Read more on livemint.com
