How SME IPOs performed in the March 2023 quarter

While mainboard IPOs may still be few and far between, the SME segment is where there is a lot of IPO action visible. In the fourth quarter ended March 2023 alone, there were a total of 37 SME IPOs across the BSE and the NSE segments put together. Of course, the total amount collected may be much smaller, but the fact that there were so many IPOs is indicative of the reality that there is still demand and appetite for IPOs where there are returns on the table left for the investors.

Highlights of the SME IPO story in Q4FY23

Here are some of the major takeaways of the SME IPO story for the fourth quarter ended March 2023. We will first look at the macro picture for the fourth quarter and then get into granular issues like returns, subscriptions, and their rankings.

• For the fourth quarter, Q4FY23, there were a total of 37 SME IPOs across the NSE and BSE SME segments put together. These 37 IPOs raised a total sum of Rs668.02 crore between them. We have only looked at SME IPOs that closed in the fourth quarter.
   

• The largest SME IPO in terms of issue size was Sealmatic India Ltd at an IPO size of Rs56.24 crore. The smallest IPO in the quarter of Amanaya Ventures had an issue size of just Rs2.76 crore.
   

• For the quarter, there were a total of 3 IPOs with issue size of more than Rs50 crore and 13 issues with an issue size of more than Rs20 crore. Out of the total of 37 SME IPOs in the quarter, 24 IPOs has an issue size of more than Rs10 crore while 13 IPOs has an issue size of under Rs10 crore.
   

• Out of the 37 IPOs of the SME segment in Q4FY23, all the SME IPOs got fully subscribed at an overall level. Anlon Technology Solutions had the best subscription of 428.62 times while Sudarshan Pharma was subscribed just 1.06 times.
   

• Out of the 37 IPOs in all, 6 SME IPOs were subscribed more than 200 times while 8 IPOs got subscribed more than 100 times. Out of the 37 SME IPOs, a total of 18 IPOs (almost 50%) were subscribed more than 10 times while 19 IPOs got less than 10X subscription.
   

• If you look at the overall picture of IPO subscription, against the Rs668 crore to be collected via SME IPOs in the fourth quarter of FY23, the total subscription bids were received for Rs35,620 crore. That is a 53.32X overall subscription on an average.
   

• Let us look at the returns story. Here returns are just calculated on a point-to-point basis and no annualization is done. Out of the 37 SME IPOs in Q4FY23, a total of 22 IPOs has given positive returns while 15 SME IPOs gave negative returns.
   

• Positive returns on IPOs have ranged from a high of 127.25% returns to just about positive returns. On the negative side, returns ranged from -2.65% to as low as -70.96%. There were a total of 3 SME IPOs giving more than 100% returns and 7 companies giving more than 50% returns since listing.
   

• Would an investor have been better off by investing in all the IPOs and getting allotment of at least one lot. Ignoring the cost of funds, the returns would have been 17.82% on capital, which is quite an attractive return on a portfolio of SME IPOs.

Let us now turn to the best and worst performing IPOs on the basis of returns and on subscription levels.

Best SME IPOs based on subscription levels

Here is a list of the top 10 IPOs based on the level of subscription. This is irrespective of the size of the SME IPO.

These are the top 10 SME IPOs in the fourth quarter ended March 2023. The best subscription was seen in the case of Anlon Technologies at 428.62 times while the tenth best SME IPO in the March 2023 quarter got subscribed nearly 65 times. There is surely an interest building up in the SME sector. Has a high level of subscription been an automatic guarantee of returns. Here are some takeaways.

Out of the top 10 SME IPOs in terms of subscription, 8 have given positive returns while just 2 have given negative returns. Out of the top 10 by subscription, there are at least 3 IPOs that have given more than 100% returns while a total of 5 IPOs had given more than 50% returns. Clearly, higher subscription appears to be impacting the returns, but we also have to look at the bottom list for ratification.

The worst SME IPOs on subscription levels

Here is a list of the bottom 10 IPOs based on the level of subscription. This is irrespective of the size of the SME IPO.

These are the bottom 10 SME IPOs in the fourth quarter ended March 2023. The lowest subscription was seen in the case of Sudarshan Pharma at 1.06 times while the tenth worst SME IPO in the March 2023 quarter got subscribed just 1.74 times. In the ranking of the 10 worst SME IPOs by subscription, none of them even managed to get to 2X subscription. Has a low level of subscription impacted and depressed returns on these SME IPOs?

The answer would be an emphatic YES. Out of the bottom 10 SME IPOs in terms of subscription, 7 have given negative returns while just only 3 have given positive returns. Out of the bottom 10 by subscription, there are at least 3 IPOs that have fallen more than 30% from the IPO price and that is not encouraging. Even out of the 3 IPOs in this list managing to give positive returns, there is just one SME IPO with returns of above 10% while the returns on the other two IPOs are below 10%.

This is rather in contrast to the trend seen in the mainboard IPOs, where the linkage between subscription levels and post-listing returns is not too straight forward. When it comes to SME IPOs, the relationship appears to clearly dependent.

A look at the 10 top SME IPOs by post listing returns

The table below captures the best SME IPOs in terms of total returns. These are the returns that are point-to-point returns.

The top 10 SME IPOs by returns have ranged from 127% to 30%. A total of 3 IPOs has given returns of more than 100% while all the top 10 IPOs by returns have given returns of over 30%. If you look at the top 10 SME IPOs by returns, 3 IPOs got subscribed more than 300 times and 4 more than 200 times. The lowest level of oversubscription has been 17.75 times, which is substantially higher than the median SME IPO subscription of 6.57 times in the March 2023 quarter. Clearly, which ever way you look at it, the extent of subscription has had a substantial impact on the post listing returns, especially where the subscription is more than the median. In fact, all the top 10 SME IPOs by total returns have subscription levels substantially higher than the median subscription level.

Finally, a look at the 10 bottom SME IPOs by post listing returns

The table below captures the worst SME IPOs in terms of total returns. These are the returns that are point-to-point returns.

The 10 worse SME IPOs by returns have ranged from -9.11% to -70.96%. A total of 5 IPOs has given returns of lower than -30% while 8 out of the bottom 10 IPOs by returns have given returns that were double digits in the negative. If you look at the bottom 10 SME IPOs by returns, only 1 IPO got subscribed substantially i.e., Aristo Biotech getting subscribed over 217 times. The other 9 IPOs got just single digit subscription. The lowest level of oversubscription has been 1.07 times. In fact, 9 out of the 10 SME IPOs in the bottom 10 by returns had subscription levels that were lower than the median of 6.57 times in the March 2023 quarter. Clearly, whichever way you look at it, the extent of subscription has had a substantial impact on the post listing returns, especially where the subscription is less than the median. However, size has hardly been a determinant of returns since the best performing and the worst performing SME IPOs in the March 2023 quarter have since a full range of IPO sizes.

Final thoughts on the SME IPOs for March 2023 quarter

Here are some of the key takeaways from the SME IPO analysis for the March 2023 quarter.

• There seems to be a substantial amount of interest in the SME IPOs as is evident from the mean oversubscription of nearly 53.32 times overall in the fourth quarter.
   

• Subscription levels are having a substantial impact on the post listing returns and the relationship between subscription levels and post listing returns is a lot more direct in the case of SME IPOs.
   

• Lastly, the size of the IPO has not been too material to returns or the extent of subscription. In fact, all the lists above have a generous mix of IPOs of all sizes.

One thing is clear that in the fourth quarter, the SME IPOs are surely emerging as a distinct and viable asset class for investors.