Mainboard and SME IPOs Performance Analysis in First Quarter of FY24

Mainboard and SME IPOs in Q1FY24

Typically, when we talk about IPOs, it has been about mainboard IPOs only. However, in the last few months, SME IPOs have become a lot more active even as mainboard IPOs have been few and far between. Our evaluation of performance of IPOs in the June 2023 quarter (Q1FY24) will separately look at the performance of mainboard IPOs and the performance of SME IPOs. We will look at the performance of NSE and BSE SME IPOs in the quarter. 

Let us talk about mainboard IPOs first. In the first quarter of FY24, there were just a total of 5 IPOs (IPOs that listed in the quarter). Between them, these 5 IPOs raised Rs9,064 crore and the dominant IPO in the quarter was that of Mankind Pharma followed by the REIT IPO of Nexus Select Trust. Out of these 5 IPOs, 4 IPOs were profitable as of the end of the quarter while 1 IPO was in loss. What about SME IPOs?

The action was a lot more frenetic on the SME IPO front. The segment saw a total of 32 IPOs in the June 2023 quarter (listed in Q1FY24). Between them, these 32 IPOs raised Rs1,017 crore and was largely dominated by Spectrum Talent Management, the only SME IPO to raise above Rs100 crore via IPO. 23 out of the 32 IPOs were profitable as of quarter end.

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How mainboard IPOs performed in Q1FY24

The table captures the 5 mainboard listed in the June 2023 quarter, ranked on returns post listing till end of the quarter. These are absolute returns without regard to holding period.

Data Source: NSE / BSE

Clearly, 4 out of the 5 mainboard IPOs gave positive returns with only Udayshivakumar Infra giving negative returns to investors. Also, 3 out of the 5 IPOs have given returns in excess of 30% since listing, which is a very strong performance. Apart from returns, let us also quickly look at how the mainboard IPOs performed in terms of subscription levels. IKIO Lighting tops the subscription charts followed (ironically) by Udayshivakumar Infra. Was there a link between the level of subscription and performance post-IPO listing? IKIO Lighting got subscribed 67.75 times and Mankind Pharma got subscribed 15.32 times, but their post-listing performance is fairly even. Udayshivakumar Infra got the second best subscription but gave negative returns. Subscription levels do matter, but what actually drives performance is how much is left on the table for shareholders.

Key takeaways from the mainboard IPO story

To begin with, 5 IPOs may be small to bring out a story, but there are some learnings nevertheless from the mainboard IPOs in the June quarter. While the total fundraising in the June quarter was to the tune of Rs9,064 crore, the actual investor interest in these stocks was to the tune of Rs128,979 crore. Let us also look at these 5 IPOs as an asset class for investors. If you calculate the arithmetic returns of five IPOs in the quarter, it stands at a healthy level of 27.44%. Had you just invested in all the 5 IPOs in the quarter by allocating equal amounts, your portfolio returns would have been 36.74%. Mainboard IPOs may have been few and far between, but they are still attractive as an asset class.

How SME IPOs performed in Q1FY24

Out of the 32 SME IPOs in the quarter, 23 are trading at a premium to the issue price while 9 are trading at a discount. Here are the top 10 performing SMEs by absolute returns

Data Source: NSE / BSE

We will only focus on the top performers and interestingly, the 10 best SME IPOs have all given more than 100% returns post listing. The top 10 IPOs by returns accounted for 28% of the SME IPO fund raising in the June quarter. On the other hand, the bottom 10 IPOs accounted for 39% of the IPO collections in the June 2023 quarter, so apparently the percentage of people in the bottom IPOs are more compared to investors in the top performing IPOs. Let us also look at these IPOs in terms of subscription levels. Out of the total SME IPO issue size of Rs1,017 crore in Q1FY24, the total interest received from investors was to the extent of Rs42,156 crore, implying an overall oversubscription of 41.46 times. One more observation is that 9 out of the 10 IPOs ranked highest on subscriptions have given positive returns post listing. That means, the extent of subscription surely matters in the case of SME IPOs. Returns have been fairly biased in favour of stocks that get substantially oversubscribed.

Key takeaways from the SME IPO story

With 32 SME IPOs listing in Q1FY24, there is enough data for inferences. The median subscription of all the 32 SME IPOs in the quarter was 136.66 times while the average was around 41.46 times. That shows there is substantial appetite in the market for SME IPOs and the performance has not really disappointed. There are some interesting takeaways. Out of the Rs1,017 crore raised by the SME IPOs, the investor interest in the stocks was to the extent of Rs42,156 crore; an extremely attractive level of subscription. Had an investor put money in all the SME IPOs without being too choosy, the portfolio of SME IPO stocks would still have yielded 56.28% on an average. With mainboard IPOs going slow, it is the SME IPOs that have sustained interest in the IPO markets and are emerging as a distinct asset class.