139 SME IPOs raise Rs 3,540 crore in 2023, attracting family offices and HNIs

A strong showing from family offices and high-net-worth individuals (HNIs), combined with ample market liquidity and a positive investor sentiment, has driven increased interest in small and medium enterprise (SME) IPOs. In 2023, a total of 139 such companies have amassed Rs 3,540 crore through initial share sales, outpacing the performance of 2022 when 109 companies raised Rs 1,875 crore through IPOs, as per data from primedatabase.com.

Experts predict that the fundraising climate for SME IPOs is likely to remain favourable. Abhishek Jain, Head of Research at Arihant Capital Markets Ltd, highlighted that key determinants include sector-specific growth potential, market liquidity, investor sentiment, and potential regulatory changes. These factors converging have contributed to the robust fundraising momentum.

According to industry data, 139 IPOs have made their debut on SME platforms such as BSE SME and NSE Emerge this year, accumulating Rs 3,540 crore in funds by October 20. Additionally, two more SMEs, Paragon Fine and Speciality Chemical, and On Door Concepts, are set to launch their maiden public issues next week. These IPOs represent a diverse array of sectors, including IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality.

These companies have leveraged the capital raised for expansion plans, bolstering working capital requirements, and retiring debt. The substantial increase in SME fundraising via IPOs in 2023 can be attributed to the active participation of family offices and HNIs in the SME market.

Favorable liquidity

Market experts attribute this surge in fundraising to the upward trajectory of the markets, favourable liquidity conditions, and businesses scaling up. Consequently, there is a heightened demand for capital, and many companies are seizing the opportunity provided by these favourable market conditions to raise capital from the public market.

Furthermore, there is a notable demand for offers for sale, as investors who had previously invested in these companies are now considering unlocking value and exiting through this route.

In terms of monthly performance, September witnessed the highest number of 37 SMEs entering the IPO market. The largest issue this year was by Spectrum Talent Management, which raised Rs 105 crore, followed by CFF Fluid Control, which garnered Rs 86 crore.

BSE and NSE introduced SME platforms in 2012, becoming the only two stock exchanges in the country to offer such segments. These platforms offer SMEs the opportunity to raise capital for growth and expansion.

(With PTI inputs)