SME IPO frenzy! Manic interest from retail investors, but here’s why you need to exercise caution

| TOI Business Desk | TIMESOFINDIA.COM | Sep 2, 2024, 12:37 IST

SME IPOs are attracting a surge of retail investors, with the ave... Read More

SME IPOs frenzy: The once-exclusive domain of high net worth individuals (HNIs), initial public offerings (IPOs) of small and medium enterprises (SMEs) are now attracting a surge of interest from ordinary retail investors. These investors are drawn to the potential for substantial gains when the shares first begin trading on the stock exchange.

Tired of too many ads?go ad free now

According to an ET report, the number of applicants for these high-risk share sales has skyrocketed in recent years. In FY20, an average of just 408 individuals applied for each SME IPO, rising slightly to 511 in FY21. However, in the current fiscal year, FY25, the average number of applicants has soared to an astonishing 219,000 per offering.

Despite the inherent risks and the requirement to invest a minimum of Rs 1 lakh, retail investors have not been deterred.

Big Bets, Large Hopes

The average gain on listing price in FY25 stands at an impressive 76%, with some IPOs, such as Hoac Foods India, Medicamen Organics, Koura Fine Diamond Jewelry, and Maxposure, seeing the retail portion oversubscribed by more than a thousand times.

The surge in retail interest began in earnest in FY23, fueled by significant rallies and substantial listing gains in certain issuances. In FY22, the average number of applications was 6,042, with average listing gains of 19%. This momentum continued in FY23, with the average number of applications rising to 31,500 and listing gains increasing to 29%. FY24 saw even more impressive figures, with average listing gains exceeding 50% and the number of applications reaching 113,000 per IPO.

Tired of too many ads?go ad free now

Pranav Haldea, managing director of PRIME Database Group, attributes this enthusiasm to the allure of potential gains in a bullish market.

Also Read | These mutual funds have returned 100% more than Nifty! Where should investors put their SIP money?

He was quoted as saying, "In a bullish market, investors tend to invest in all IPOs, hoping for allotments in some, due to the high likelihood of listing gains." He also notes that the simplicity of investing through trading apps has made the process more accessible, requiring just a few clicks and allowing funds to remain in the investor's bank account until allotment.

SME IPOs: Note of caution

The Securities and Exchange Board of India (Sebi) has issued a cautionary advisory regarding investments in securities of companies listed in the SME segment. This comes in response to the frenzy surrounding SME IPOs. Sebi stated that certain SME companies and their promoters have been employing tactics to present a misleadingly positive picture of their operations, and then capitalizing on this momentum to offload their own holdings at a profit.

Also Read | Who are India’s richest investors? These top individual investors made more money in June quarter

In an effort to bring more stability to the opening price discovery process for SME stocks, the National Stock Exchange implemented a cap of 90% over the offer price for SME IPOs during a special pre-open session on listing day in early July. It is noteworthy that approximately 60 IPOs this year listed between 90% and 400% above the issue price.

Several market experts have also advised retail investors to exercise caution in this regard.

Haldea, highlights a pressing concern. "What is even more troubling is that many retail investors today are relatively new entrants, having opened their demat accounts only in the last 3-4 years. Consequently, they have not experienced significant market corrections or major frauds, which make them more susceptible to risks," he said.

Top 10 Richest Indian Persons 2024: Gautam Adani Tops List!

Top 10 Richest Indians 2024: Who are the richest persons in India in 2024? Gautam Adani has surpassed Mukesh Ambani to become the richest Indian in 2024, according to the Hurun India Rich List 2024. Over the past five years, six individuals have consistently been in the list of the top 10 richest Indians. These are Mukesh Ambani, Gautam Adani, Shiv Nadar, Cyrus Poonawalla, Gopichand Hinduja and Radhakishan Damani. The 2024 richest Indians list, which features Indians with a net worth exceeding Rs 1,000 crore, expanded by 220 individuals to a total of 1,539. The cumulative wealth of these individuals has increased by 46% over the past year. We take a look at the top 10 richest Indians in 2024 as per the latest Hurun list:

Top 10 richest Indians 2024: Gautam Adani & family top the list of the top 10 richest persons in India, according to the Hurun list. After recovering from the setback caused by the Hindenburg Research report, Gautam Adani's net worth surged by 95% to Rs 11.6 lakh crore last year, allowing him to surpass Mukesh Ambani and become the richest Indian. However, in the 2023 report, Adani's wealth dropped by 57% to Rs 4.74 lakh crore, while Ambani's fortune grew to Rs 8.08 lakh crore. In the 2014 edition, Hurun had estimated Adani's wealth at Rs 44,000 crore, making him the tenth richest Indian at that time.

Top 10 richest Indians 2024: Mukesh Ambani and family rank 2nd on the list of India’s richest persons for 2024. Reliance Industries Chairman and Managing Director Mukesh Ambani's overall net worth increased by 25% to Rs 10.14 lakh crore, as per the 2024 Hurun India Rich List. Mukesh Ambani saw his wealth grow by 150% over the last 5 years and is now the second richest Asian.

Shiv Nadar and his family of HCL moved up one position to become the third richest, with a net worth of Rs 3.14 lakh crore, according to the 2024 Hurun India Rich List. Hurun has also rated Shiv Nadar as the most generous Indian in the EdelGive Hurun Philanthropy List 2023.

In 2024, Cyrus Poonawalla of Serum Institute of India fell one spot to become the fourth richest Indian, with a net worth of Rs 2.89 lakh crore. According to the Hurun report, Poonawalla’s wealth has grown 3.1 times since 2020, majorly due to Serum Institute’s success.

Top 10 richest Indians 2024: Dilip Shanghvi of Sun Pharmaceuticals is the 5th richest Indian. He has advanced to the fifth richest position, up from sixth last year, with a net worth of Rs 2.50 lakh crore.

Kumar Mangalam Birla ranks 6th on the list of the top 10 richest persons in India. Kumar Mangalam Birla has seen a 6.9-fold increase in his wealth in the last 5 years. KM Birla and family have climbed three spots to secure the 6th rank in this list. Their wealth has increased by 87% to Rs 2.25 lakh crore.

Gopichand Hinduja & Family maintained their 7th rank in the list of the top 10 richest Indians for 2024. Gopichand Hinduja & Family saw a 9% increase in their wealth to Rs 1.92 lakh crore. However Gopichand Hinduja’s rank has declined from 2nd in 2020.

Radhakishan Damani & Family are the 8th richest in the list of top 10 richest Indians for 2024. Radhakishan Damani’s wealth has increased by 2.2 times in the past five years, according to Hurun’s list. The current net worth of Radhakishan Damani & family stands at Rs 1.9 lakh crore.

Azim Premji and his family claimed the 9th spot in the top 10 richest Indians list with a wealth of Rs 1,90,700 crore. Despite a 25% drop in Wipro’s share price over the past three years, the net worth increased by 27% during the review period. Azim Premji is the only living Indian to have featured in EdenGive Hurun India Philanthropists of the Century.

Ready to Master Stock Valuation? ET’s Workshop is just around the corner!

The TOI Business Desk is a vigilant and dedicated team of journal... Read More

Start a Conversation

Post comment

Popular from Business

More News

Follow Us On Social Media

end of article

Follow Us On

SME IPO frenzy! Manic interest from retail investors, but here’s why you need to exercise caution

About the Author

TOI Business Desk

Start a Conversation

Follow Us On Social Media