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19 Nov 2024
Retail investors are eagerly investing in lesser-known SME IPOs, driven by grey market premium (GMP) signals, creating unprecedented FOMO (fear of missing out) on Dalal Street.
In the first half of 2024, returns from SME IPOs have surged up to 1,500%. Of the 110 SME IPOs listed, 87 have yielded positive returns, with 43 doubling investors' money, according to PRIME Database.
A significant majority, 3 out of every 4 SME IPOs, have increased investor wealth, with a 40% multibagger success rate. Notably, Owais Metal & Mineral Processing topped the charts with a 1,542% return, followed by Australian Premium Solar, Alpex Solar, Refractory Shapes, and Winsol Engineers, all seeing at least 500% gains. Consequently, the BSE SME IPO index has risen over 90% this year.
Nevil Savjani of Beeline Capital Advisors attributes this success to attractive valuations compared to listed peers, bolstered by government support and the China plus one strategy, which have created growth opportunities for MSMEs.
Vipin Aggarwal of Narnolia Longview Research & Advisory highlights that new companies are entering the market with lower PE ratios of 12-14x, indicating substantial return potential as the SME sector transitions from unorganized to organized.
Despite the enthusiasm, concerns about inflated valuations are growing. Veteran investors warn of a potential bubble in SME IPOs, where many stocks are priced to perfection, offering little margin for safety.
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