" 139 Small Businesses Raise Rs 3.54 Billion with IPOs in 2023!"
The year 2023 has witnessed a remarkable surge in the Initial Public Offerings (IPOs) of small and medium enterprises (SMEs) in India. The strong participation of family offices, high-net-worth individuals (HNIs), favorable market conditions, and optimistic investor sentiment have combined to create an unprecedented level of interest in SME IPOs. As of October 20, 2023, 139 SMEs have successfully raised Rs 3,540 crore through initial share sales, surpassing the entire IPO funding of 109 companies in 2022, which amounted to Rs 1,875 crore. This positive trend is expected to continue, driven by various factors such as sector-specific growth potential, market liquidity, investor sentiment, and potential regulatory changes. In this blog post, we delve into the factors contributing to this surge and what the future holds for SME IPOs in India.
The Current State of SME IPOs
The data from primedatabase.com highlights the exceptional growth in SME IPOs in 2023. A total of 139 IPOs have made their debut on the SME platforms of the BSE SME and NSE Emerge, raising an impressive Rs 3,540 crore. What’s even more promising is that there are still more SME IPOs on the horizon, with companies like Paragon Fine and Speciality Chemical and On Door Concepts scheduled to open their maiden public issues in the coming weeks.
These SMEs represent a diverse range of sectors, including IT, FMCG, automotive components, pharma, infrastructure, advertising, and hospitality. The funds raised from these IPOs are being used for expansion plans, supporting working capital requirements, and retiring debt, signifying a drive for growth and financial stability within these SMEs.
The Role of Family Offices and HNIs
One of the driving forces behind the surge in SME IPOs in 2023 has been the active participation of family offices and high-net-worth individuals (HNIs). These investors have injected substantial capital into the SME market, providing companies with the funds needed to realize their growth plans. The reasons behind their increased involvement include:
1. Market Upswing: The upward movement in the markets has created a favorable environment for IPOs, making it an attractive avenue for capital generation.
2. Liquidity: The liquidity in the market has been robust, allowing for smoother IPO processes and encouraging more companies to tap into the public market.
3. Scaling Businesses: Many SMEs are in the process of scaling up, and the increased demand for capital has prompted them to explore IPOs as a viable fundraising option.
4. Unlocking Value: Investors who had previously invested in these companies are now looking to unlock value and exit through the IPO route, given the current market conditions.
September 2023 marked a particularly significant month for SME IPOs, with 37 companies entering the IPO market. The largest issue of the year was Spectrum Talent Management, which raised Rs 105 crore, followed closely by CFF Fluid Control, which mopped up Rs 86 crore.
The Role of Market Conditions
SME IPOs have also benefited from favorable market conditions, including the convergence of factors such as sector-specific growth potential, strong market liquidity, and positive investor sentiment. These factors have created a conducive environment for SMEs to access capital through the public market.
The Way Forward
The momentum in SME fundraising through IPOs is expected to persist as the factors driving this surge continue to align. The ongoing participation of family offices and HNIs, coupled with the strong demand for offers for sale, indicates a growing appetite for SME IPOs. The introduction of regulatory changes and the continued growth of sectors with high potential will further enhance the attractiveness of SME IPOs as a means of capital generation.
It’s important to note that stock exchanges BSE and NSE played a pivotal role in this trend by launching dedicated SME platforms in 2012, providing a unique and valuable opportunity for small and medium enterprises to access the capital they need for growth and expansion.
In conclusion, the surge in SME IPOs in India in 2023 represents a significant shift in the way small and medium-sized enterprises are accessing capital for their development. With the continued participation of family offices, HNIs, and favorable market conditions, the SME IPO space is poised for sustained growth and will likely play an essential role in the development of these enterprises and the Indian economy as a whole.
