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Are Small and Medium Enterprises IPOs the best kept secret in investing?

Are Small and Medium Enterprises IPOs the best kept secret in investing

In the world of finance, there’s a hidden gem that many people overlook: SME IPOs. While big companies’ IPOs often get all the attention, SME IPOs can be incredibly rewarding. They offer a way to diversify your investments and support growing businesses. In this blog post, we will explore the world of SME IPOs, clear up some common misunderstandings, and provide a detailed guide on how to apply for them. By the end, you’ll see why SME IPOs should be part of your investment strategy and how Egniol can help you along the way.

Why SME IPOs?

Small and Medium Enterprises (SMEs) are the backbone of many economies. In India, they contribute about 30% of the GDP and around 45% of total exports. The government supports SMEs with policies like easier loans through the Mudra Scheme, tax benefits, and initiatives like ODOP and the PLI scheme. The future looks bright for SMEs, making them a great investment opportunity.

Impressive Performance

SME indexes have performed better than bigger benchmarks. Over the past two years, SME indexes have shown a Compound Annual Growth Rate (CAGR) of 39%, compared to 12% for the Nifty 50 and 16% for the Nifty Small Cap 100. This shows the high growth potential of SME IPOs.

Real-World Examples

Look at companies like Kay Cee Infra Limited and Amcay Products. These smaller companies have seen their IPOs massively oversubscribed, showing strong investor interest. For example, Kay Cee Infra’s IPO was oversubscribed by 1311 times, while Amcay Products saw an oversubscription of 973 times. This indicates strong confidence in their growth potential.


Current Market Scenario

The current market scenario for SME IPOs is very promising. With the government’s pro-SME policies, such as easier loans through the Mudra Scheme, tax benefits, and initiatives like ODOP and the PLI scheme, SMEs are getting more support than ever. These policies have made it easier for SMEs to grow and expand, which in turn makes them attractive investment options. Investors are starting to notice the potential of SME IPOs. The performance of SME indexes, compared to larger benchmarks, shows this trend. Over the past two years, SME indexes have shown a Compound Annual Growth Rate (CAGR) of 39%, compared to 12% for the Nifty 50 and 16% for the Nifty Small Cap 100. This means that SMEs are growing faster than larger companies. Moreover, India’s SME sector has been a powerhouse for years, contributing a significant 30% to the nation’s GDP and approximately 45% to India’s total exports. With the government’s pro-SME policies, including easier loans through the Mudra Scheme, tax benefits, and initiatives like ODOP and PLI scheme, the future looks even brighter.

Furthermore, the SME IPO market has seen a steady increase in the number of companies going public. With more SMEs choosing to list on stock exchanges, investors have a wider range of options to choose from. This variety allows investors to diversify their portfolios and reduce risks. Real-world examples like Kay Cee Infra Limited and Amcay Products, which had their IPOs massively oversubscribed, show strong investor confidence. Kay Cee Infra’s IPO was oversubscribed by 1311 times, and Amcay Products saw an oversubscription of 973 times. This high demand indicates that investors are eager to invest in promising SMEs. Overall, the current market scenario for SME IPOs is full of opportunities. With strong government support, impressive growth rates, and increasing investor interest, SMEs are becoming a key focus for smart investors looking to achieve high returns.

Clearing Up Misunderstandings About SME IPOs

Despite their potential, there are many misunderstandings about SME IPOs. Let’s address some of the most common ones:

Myth 1: SME IPOs Are Too Risky

All investments carry risk, but SME IPOs offer a unique chance to invest in companies at their early growth stages. By doing thorough research and assessing each company’s value, you can manage risks and potentially gain significant rewards.

Myth 2: Only Large Investors Benefit from SME IPOs

SME IPOs are not just for big investors. Retail investors can participate by opening demat accounts and applying for shares. The key is to be strategic and informed about the investment opportunities.

Myth 3: SME IPOs Lack Liquidity

SME stocks might not be as easy to trade as large-cap stocks, but increasing interest and government support for SMEs are improving liquidity. Investors with a long-term perspective can benefit from the growth potential of these companies.

How to Apply for SME IPOs: A Step-by-Step Guide

Step 1: Open a Demat Account

To apply for SME IPOs, you need a demat account. This account holds your shares in electronic form. You can open a demat account with a registered stockbroker or intermediary.

Step 2: Research Potential IPOs

Before investing, research the companies offering SME IPOs. Look at their business models, financial health, and growth prospects. This will help you make informed decisions.

Step 3: Apply for Shares

Once you’ve identified a promising SME IPO, you can apply for shares through your demat account. This process involves filling out an application form and submitting it through your stockbroker.

Step 4: Allotment Process

After applying, the allotment process takes place. This is where shares are allocated to investors. Given the high demand for some SME IPOs, not everyone who applies will receive shares.

Step 5: Monitor Your Investment

After receiving the shares, monitor your investment regularly. Keep track of the company’s performance and market trends to make informed decisions about holding or selling your shares.

Start Investing in SME IPOs and See the Difference?

SME IPOs offer a unique and often overlooked investment opportunity. By understanding the myths, recognizing the potential, and following a strategic approach, investors can achieve significant gains. As you consider getting deeper into the world of SME IPOs, reflect on the insights shared here and think about how you can incorporate these opportunities into your investment strategy.

Investing in SME IPOs not only allows you to support small and medium-sized enterprises but also offers a chance to be part of their growth journey. The impressive performance of SME indexes, strong government support, and increasing investor interest make SME IPOs a compelling investment option.

We have seen many SMEs benefit from supportive government programs and expert guidance. By leveraging such opportunities, many businesses have grown and expanded. Whether you need assistance with certification, digital marketing, funding, or understanding the SME IPO process, finding the right support can make all the difference.

What are your thoughts on SME IPOs? Do you believe they are an underrated opportunity, or do you have reservations about investing in them? Share your thoughts in the comments below!

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