In a high risk-high return market, companies listed on the small and medium enterprises (SME) platforms have turned out to be multibaggers, notching up returns ranging from 300 per cent to 2,500 per cent.
The BSE SME IPO index, a representative of all the SME stocks listed on BSE, has risen over nine times in just two years to 947 from a base of 100.
Out of the 101 companies listed on the BSE SME platform, 60 have given positive returns ranging from 200 per cent to 2,500 per cent, while 41 others are currently trading in the red.
“The BSE SME index presents a broader picture of the companies listed on the platform. Some of them have done very well while a few others have given average returns. Overall, this segment has put up a good show,” said Ajay Thakur, head of BSE SME Exchange.
Both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have SME platforms, where trading is restricted mainly to large investors as the lot size is of Rs 1,00,000. The NSE platform has seen just seven listings so far.
Out of the 94 companies listed on the BSE SME platform, seven have already moved to the main board. As on date, the BSE SME platform has a total market-capitalisation of Rs 8,202 crore.
Companies listed on the SME platform are allowed to migrate to the main board when they grow in size and are able to meet the criteria for listing on the main board.
Existing norms need firm to complete two years on SME platform and achieve post-issue paid-up capital of Rs 10 crore or above to qualify for listing on the main board.
Also, if the paid-up capital of a company exceeds Rs 25 crore, it would be compulsorily required to migrate to the main board. “SME stocks provide significant opportunity to investors. It is a high risk-high return instrument, which has yielded superb returns to long-term investors,” said Mahavir Lunawat, managing director of Pantomath Capital Advisors, a leading merchant banker in the SME market. The firm claims to have lead-managed most SME IPOs in terms of value during 2014-15. “It’s heartening to note that ultra-HNIs and institutional investors have also started looking at the SME market... ” Lunawat said. Pantomath SMEX-30, an index for SME scrips, saw over 188 per cent rise in last calendar alone. The SME platforms are for meant for small-sized companies, to facilitate raising of equity capital under relaxed regulatory and disclosure requirements compared with those for the main platform.
Many investors on the SME platforms are domestic high networth individuals (HNIs). Institutional players like banks and brokerages have also begun to take interest in this segment.
“Several investors have gained by investing in these companies. Many of them have huge potential for growth and investors gain by taking exposure to them at an early stage,” said Gaurav Jain, director of Hem Securities, a Mumbai brokerage.
More than 20 SMEs have filed draft red herring prospectus with the BSE SME platform this year, seeking permission to get listed. Seeing the success of companies listed on the SME platform, many small firms are showing interest in listing on the BSE SME platform, Thakur said.
“We are also creating awareness among SMEs about the benefits of listing on this platform, which can help them not only raise funds but also improve corporate governance practices apart from improving operational efficiencies,” he said.
“The SME exchange is a never-before opportunity for stakeholders. It enables emerging companies to unlock value, raise growth capital and reduce debt burden,” Lunawat said.
Citation from Deccan Chronicles : http://goo.gl/ggKjXN