Are SME IPOs back to square one?

Published on Thursday, May 28, 2020 by Dilip Davda | Modified on Thursday, May 13, 2021

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Are SME IPOs back to square one?

As we all know SME IPO regime started from 2012 and BSE was the first exchange to start it with IPO of B2B Finance in the month of February 2012. NSE EMERGE SME however took its own time to start the platform. As per records, it started this segment in September 2012 with Thejo Engineering Ltd.

Since then while BSE SME has seen listing of 321 companies, NSE Emerge SME has marked listing of 183 companies till this date (i.e. 26.05.20). And during this period of about 9 years, SME segment has seen roller coaster ride on listing performances.

If one goes through the history of listings, after initial hiccups, while SME segment gained momentum following hefty returns of few early birds and also created a net record of oversubscription for few IPOs, it is in miserable status currently with many merchant bankers seating on fence and waiting for opportune time to start primary market action.

History of SME IPOs

In the first two years itself, BSE SME witnessed big havala scandal that lead to suspension of five companies and also a Lead Manager who brought those IPOs. After the completion of periods, suspension was revoked and activities started again on those counters and even Lead Manager came with new IPOs. By the turn of time although we have seen around two dozen Lead Managers trying their fate, we could mark five top ranking Lead Managers that included Pantomath Capital Advisors, Sarthi Capital Advisors, Guiness Corporate Advisors, Hem Securities and Aryaman Financial Services. All these five Lead Managers brought many SME IPOs. You can access the list of IPOs brought by them on our website Thereafter, we have also witnessed new bunch of Lead Managers who also created some records with their first mandate. Some of them were Holani Consultants, Beeline Broking, Navigant Corporate etc.

Top ranking five Lead Managers also tried their luck with main board IPOs and three of them i.e. Pantomath, Aryaman and Sarthi did succeeded but Hem Securities failed with the mainboard IPO of Dinesh Engineering and Guiness Corporate that had mandate for Heranba Industries and also got SEBI nod could not launch the IPO as the group company has been suspended for penal action. Some of the main board aspirant Lead Managers like PL India, SMC Capital, Systematix Corporate has also tried their luck with SME IPOs.

Top Lead Managers in India

Lead Manager Total SME IPOs Total Main Board IPOs Overall Total of IPOs

Pantomath Capital Advisors Pvt. Ltd.




Aryaman Financial Services Ltd.




Sarthi Capital Advisors Pvt. Ltd.




Guiness Corporate Advisors Pvt. Ltd.




Hem Securities Ltd.




Well the first phase of SME IPOs in early state tried hard to lure investors but because of larger minimum lot of Rs. 1 lakh for application as well as for trade post listing kept away average investors. But with the successful game with hand in gloves between Lead Managers, Market Maker and Promoters helped them attracting masses with hefty returns in short to medium term post listing. This resulted in many times subscriptions for SME IPOs that surprised one and all and also raised the eyebrows. List of history creating in subscription SME IPOs is as shown below:

69.5+ Times Oversubscribed SME IPOs


Lead Manager

Issue Size



Overall Sub

Global Educations Ltd

Hem Secur

Rs 10.25 Cr




Focus Lighting & Fixtures Ltd

Sarthi Capital Advisor

Rs 4.05 Cr




Dev Information Techno Ltd

Hem Secure

Rs 6.25 Cr




Accord Synergy Ltd.

Hem Secure

Rs 5.83 Cr




Total Transport Systems Ltd.

Sarthi Capital

Rs 17.01 Cr




ANI Integrated Services Ltd.

Hem Secure

Rs 25.66 Cr




Zodiac Energy Ltd.

Swastika Inv

Rs 10.14 Cr




ICE Make Refrigeration Ltd.

Vivro Financial Serv

Rs 23.71 Cr




Moksh Ornament Ltd.

Guiness Corp

Rs 11.03 Cr




Jhandewalas Foods Ltd.

Guiness Corp

Rs 16.01 Cr




Vasa Retail & Overseas Ltd.

Hem Securities Ltd.

Rs 4.8 Cr




Focus Suits Solutions & Sercies Ltd.

Pantomath Capital Adv

Rs 6.49 Cr




Tasty Dairy Specialities Ltd.

Mark Corporate Adv

Rs 24.44 Cr




Hindcon Chemicals Ltd.

Hem Securities Ltd.

Rs 7.73 Cr




E2E Networks Ltd.

Holani Consultants Pvt. Ltd.

Rs 21.99 Cr




Well as the fancy created by above IPOs faded over, SME IPO status came back to square one once again as can be seen from the following table:

Current Status of Subscription Pattern

Company BRLMs Offer Size Rs. Crore at allotment price basis HNI Retail Overall Sub

HindPrakash Ind Ltd.

Hem Securities Ltd.





Janus Corporation Ltd.

First Overseas Capital





Madhav Copper Ltd. (FPO)

Pantomath Capital Advisors





Tranway Technologies Ltd.

Finshore Management Services





Chandra Bhagat Pharma Ltd.

Beeline Broking Ltd.





ICL Organic Dairy Products Ltd.

Finshore Management Services





SM Auto Stamping Ltd.

Hem Securities Ltd.





RO Jewels Ltd.

First Overseas Capital





Cospower Engineering Ltd.

Shreni Shares Pvt. Ltd.





DJ Mediaprint & Logistics Ltd.

Finshore Management Services





Laxmi Goldorna House Ltd.

Beeline Broking Ltd.





Nirmitee Robotics India Ltd.

Aryaman Financial Services





Due to such status of affair, one needs to look into the process of SME IPOs. First and foremost is the missing quality of IPOs as exchanges gave importance to quantity in the race for higher listing nos. Secondly, the game of Lead Managers, Market Makers and Promoters misguided investors at large with their hand in gloves operations. For such operations, Lead Managers and Market Makers created pool of investors as their subscribers' bank that included their clients, HNIs, relatives and friends. They were luring investors from such created pools and structuring subscription with some assured returns in a given time. But off late many Lead Managers/Market Makers and Promoters failed to live up to confidence and dishonored their commitments.

In the first phase, SME IPOs were launched once the concerned parties are ready with little over one time subscription commitments in their hand. As their game succeeded in luring masses for subscription, going on back foot by Market Makers, Lead Managers and Promoters finally resulted in diminishing pool of investors backing Lead Managers/Market Makers. And currently SME IPOs are back to square one. Recent SME IPOs in the lock down period were under such structured process.

Another factor is of purpose of fund raising. As we have seen over 80% IPOs raised funds for their working/general corpus fund needs, it was largely used for maintaining the screen in the initial period of listing, as informed by knowledgeable circles engaged in the process of SME IPOs maintaining their anonymity.

As we all know an old saying 'Everybody cannot be fooled every time', we are witnessing such happenings on SME IPO front. According to market sources, many mandates could not getting converted into an IPO deal as talks on structuring and assured returns are not matching the demand post failure seen in the recent past.

Concerns that needs to be attended

For SME IPOs vetting of offer documents are currently in the hands of exchanges that are most lenient in granting permissions. However, according to knowledgeable circles, NSE Emerge department is following some stricter norms. But after seeing the math of SME IPOs and the current state of affairs, section of market is urging SEBI to take over SME IPO vetting process.

In the given current scenario of more liberal policies being framed for MSME segment wherein, Central and State Governments are offering incentives, Banks have indicated cheaper loans for this segment and have indicated target of funding for over Rs. 50000 crore in the near term, Exchanges have reduced listing fees by 25% to pave the way for SME IPO promotion, according to SME market operators, it's high time that SEBI to take reins of vetting offer documents in their hands to safeguard investors. Alternatively, they should order stricter norms for vetting to be followed by the exchanges and the modified due diligence from Lead Managers and Market Makers. At the same time, since SME segment aspirants have ultimate aim of migrating to main board, let them announce quarterly results that will help them in reducing dormancy for their counters post listing.

Well, under the ongoing lockdown period and the likely delay in restoration of normalcy, we might see very few SME IPOs that will come with fully structured process. Unless hard work is put in by Lead Managers, Market Makers and Promoters in attracting genuine long term investors for their IPOs, SME IPOs may not find fancy with an average investors. Of course, whether its SME IPO or the Main board IPO, concerned parties are always a worried lot with listing gainers masses.

Market participants are divided on the pattern of structured IPOs. While some are in favor of it as SEBI and the concerned parties want long term well informed investors to participate in such IPOs. But others opine that with such pattern, limited pool of investors will start diminishing with scarcity of funds and thus it will get impacted and hence general public participation is needed. Since banks have announced intention of funding MSMEs with cheaper funds for working capital, IPOs for capital expenditure, capacity expansion, new venture etc should be given priority. IPOs with repayment/pre-payment of promoter's loan object were also not favored by investors so far. Hence let us try to keep such lot on back burner for now. And most importantly, let SEBI take over vetting of SME IPO offer documents with creation of special division for that as more IPOs of SME segments are foreseen in large numbers going forward.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.



6. TANMOY BANERJEE  Jun 8, 2020 06:26 I Like It. | Report Abuse Reply
Very good article. Analytical and well explained.
5. R. Ramnath  Jun 3, 2020 16:37 I Like It. 1 | Report Abuse Reply
There couldn't have been a better time for this article; very analytical and aptly surmised.
Mr. Davda has hit the nail on the head without trying to be politically correct.
In my view and as largely suggested in his article, the pain points in the SME IPO industry are:
i. Poor Balance Sheet quality
ii. Sudden jump in EBIDTA and PAT margins in the year of IPO in order to have better valuations and aggressive price
iii. Offer document being very mundane no realistic clue on the industry future and the offering company's market share in that
iv. In the anxiety to promote SME listings, quality of promoter, company's future in the not too distant future, end utilisation of funds are all not well defined; therefore lacking accountability of promoter to deliver.
The following could make things better:
i. Serious vetting of offer doc by the SX or by SEBI as suggested
ii. Lead Manager or its associate not to be Market Maker
iii. Some variable parameter or milestone achievement to be part of IPO process say in 2-3 years time so that the Promoter is held accountable. If those practical parameters are not attained, some action such as compulsory buyback at predefined reasonable IRR from retail investors be made obligatory. Although equity is 100% risk instrument; some mechanism to prevent retail investors losing their shirt shud be put in place so that structured IPOs by the LM Market Maker Promoter nexus is discouraged.

In a nutshell, genuine companies with genuine businesses shud be only encouraged to raise funds even if we have limited IPOs every year.

Great article by Mr. Davda; pleasure reading some blunt statements
4. Rushi Pandya  May 29, 2020 18:11 I Like It. | Report Abuse Reply
Nice article Davda ji.. always very knowledable.
3. Aditya Gupta  May 29, 2020 14:43 I Like It. | Report Abuse Reply
I agree, sme ipo are back to square one, market confidence has been shaken due to performance track of listed sme where it did'nt match with commitments and market expectations, Govt should step in to boost confidence again, ????
2. bk sarma  May 29, 2020 14:32 I Like It. | Report Abuse Reply
good information and analysis.solution will be public activation to involve rather than sebi vetting.ultimately confidence building happens with quality of issues.if the lead managers and exchanges look at this aspect to ensure that more listings wil grow and go to the main board then we can see success of sme exchanges
1. Saket Jain  May 29, 2020 13:57 I Like It. | Report Abuse Reply
Good analysis on the journey of SME IPO segment