When we talk about the stock market, it's usually the big companies that grab all the headlines. Yet, there's a thriving world of smaller companies with great potential that often escapes the spotlight. These are the small and medium-sized businesses, or SMEs, which may start small but hold ambitions for significant growth.
And this is where SME IPOs come in, and we're here to bring them directly to you. An SME IPO is when small and mid-sized businesses first offer their shares to the public. It's like an attractive investment opportunity that everyone could discuss later if it succeeds big time.
And it's not just talk – some SMEs have already made a splash. Take, for instance, Goyal Salt Limited, which had a massive gain of 258% on the listing day, and Phantom Digital Effects Limited wasn't far behind with gains of 229.16%.
Curious to understand how SME IPOs work and how you can get started with it? Here's a quick 5-minute read for you:
What is an SME IPO?
Small and Medium Enterprises (SMEs) announce Initial Public Offering (IPO) to raise capital from the public by offering shares of the company, known as SME IPO. They are typically smaller in scale and are listed and traded on dedicated platforms, such as the NSE Emerge Platform.
In India, companies with a post-issue capital of less than ₹25 crores are eligible to raise capital SME IPOs.
What Does it Offer to Retail Investors?
Launching an SME IPO on the FYERS platform encourages retail investors to participate in the growth journey of dynamic and innovative enterprises. It offers several benefits:
Early-stage Investing: Retail investors can capitalize on the growth potential of smaller companies with innovative products, competitive advantages, and robust growth prospects. These investments offer an opportunity to be early participants in emerging success stories, providing retail investors with the potential for higher returns compared to larger, more established companies' IPOs.
Potential for Higher Returns: Unlike their larger counterparts, SMEs tend to be undervalued due to factors like lower market visibility, reduced liquidity, and limited analyst coverage. This often results in a valuation discrepancy. Savvy investors can exploit this valuation differential by buying shares when they're cheaper and selling them when the price rises.
So to sum up, if you're an investor seeking to gain an early foothold in nascent enterprises, SME IPOs provide the gateway to investing in smaller companies with ambitious growth potential, in contrast to their larger, more established counterparts.
What are the risks associated?
While SME IPOs offer many benefits to retail investors, they also come with certain risks to be considered before investing. Some of these risks are:
Volatile Growth Path: The growth trajectory of SMEs can be unpredictable due to numerous challenges, such as limited access to essential resources like capital, cutting-edge technology, skilled personnel, and infrastructural support.
Higher Initial Investment: When investing in SME IPOs, you'll need a relatively larger capital outlay, with a minimum application size of ₹1 lakh , in contrast to regular IPOs where retail investors can get started with a minimum application size of ₹15,000.
SME IPOs vs Regular IPOs
To understand the differences between NSE SME IPOs and regular IPOs, let us compare them on some key parameters:
How have SME IPOs performed?
Over the last 3 months, we've seen a spectrum of SMEs offering their shares to the public, with varying degrees of success upon listing. To give you a clearer picture, we've compiled the listing gain percentages from August to October into comprehensive graphs. These visual aids will provide a snapshot of the market's reception to recent SME IPOs.
Check out the charts below for a quick understanding:
August, 2023
"The chart displayed above illustrates substantial first-day listing gains during the month of August 2023."
September,2023
"The above chart showcases the list of SME IPO's and their respective listing day gains for the month of September, 2023."
October, 2023
"The chart above illustrates noteworthy listing gains in the month of October, 2023"
We've summarized all the data depicted above in easy-to-read tables for your reference ☺️
How to Apply for an SME IPO via the FYERS platform?
Within the FYERS platform, you can participate in SME IPO by clicking here. To know more about the process, check out the GIF below:
To know more about SME IPO, refer FYERS Support Portal.
Parting Thoughts
While we're all familiar with traditional IPO investments, SME IPOs present a new door of possibilities for investors. With SME IPOs now available on the FYERS Platform, you not only gain access to more IPO opportunities but also unlock a potentially more promising avenue for IPO investing.
If you're eager to dive in, starting your journey with FYERS is remarkably simple. Just open your account, and you're ready to roll. And if you find our products and features captivating, why not share the wealth? Spread the word and introduce your family and friends to be a part of the FYERS family.