SME IPO Insights: Lessons from Indian Exchanges Since 2012

Discover key learnings and trends from Indian SME IPOs since 2012, and how these insights can guide your small business’s journey to a successful public offering.

Introduction

Small and Medium Enterprises (SMEs) play a crucial role in driving economic growth and fostering innovation. However, accessing capital has long been a significant challenge for these businesses. In recent years, Initial Public Offerings (IPOs) have emerged as a viable alternative financing avenue, providing small businesses with a direct pathway to public markets. This blog delves into the lessons learned from Indian SME IPOs since the inception of the SME Exchange in 2012, offering valuable insights for small businesses aspiring to go public.

The Evolution of SME IPOs in India Since 2012

Since 2012, the Indian SME Exchange has been a pivotal platform for SMEs seeking to raise capital through public offerings. Over the past decade, there has been a notable transformation in the scale and sophistication of SME IPOs:

• Increased Capital Raised: Of the ₹200 billion SME IPOs issued, over 90% have been through fresh offers or primary capital. This trend underscores the growing confidence of investors in small businesses and their potential for growth.

• Growth in Offer Sizes: The median offer size has tripled from approximately ₹80 million a decade ago to around ₹250 million today. This significant increase reflects the expanding ambitions and capabilities of SMEs in accessing larger pools of capital.

• Market Capitalization and Revenue Growth: The median IPO market capitalization has surged by 4.5 times to approximately ₹1,000 million, while median revenue at the time of IPO has grown threefold to around ₹750 million. These figures indicate a robust growth trajectory for SMEs entering the public domain.

Key Learnings and Trends

Analyzing over a decade of SME IPO activity in India reveals several critical trends and lessons that can guide small businesses on their IPO journey.

1. Investor Valuation Priorities

Investors in SME IPOs place greater emphasis on pre-IPO EBITDA growth and revenue growth rather than absolute EBITDA and revenue figures. This preference highlights the importance of demonstrating sustained growth and potential for scalability over merely showcasing current financial standings.

2. Preparation and Readiness

Successful SMEs typically exhibit a high level of IPO readiness, which includes robust financial structuring, compliance with regulatory requirements, and strategic market positioning. Comprehensive preparation ensures that businesses are well-equipped to navigate the complexities of the IPO process.

3. Market Visibility and Scalability

Listing on exchanges like BSE SME and NSE Emerge significantly enhances a company’s market visibility. This increased exposure not only attracts potential investors but also lays the foundation for long-term scalability and sustained growth.

4. Regulatory Compliance and Advisory

Navigating the regulatory landscape is a critical aspect of the IPO process. SMEs benefit immensely from expert advisory services that provide guidance on compliance, legal requirements, and financial structuring, ensuring a smooth transition to the public market.

Implications for Small Businesses Aspiring to IPO

The insights derived from Indian SME IPOs offer a roadmap for small businesses considering going public:

• Focus on Growth Metrics: Prioritize demonstrating consistent growth in EBITDA and revenue to attract investor interest.

• Ensure Comprehensive Preparation: Engage in thorough preparation to meet IPO readiness, including financial audits, compliance checks, and strategic market positioning.

• Leverage Market Platforms: Utilize established exchanges like BSE SME and NSE Emerge to gain market visibility and access larger capital pools.

• Seek Expert Guidance: Partner with experienced advisory firms to navigate the regulatory and financial complexities of the IPO process effectively.

How TriC Global Can Assist in Your IPO Journey

At TriC Global, we specialize in revolutionizing capital market solutions for SMEs and startups through our unique ‘IPO as a Service’ approach. Leveraging over 20 years of expertise in capital markets, we offer comprehensive support tailored to your business’s unique needs:

• IPO Readiness Strategies: We help you prepare for the IPO process, ensuring compliance, financial structuring, and strategic positioning.

• Regulatory Compliance Assistance: Our team of experts navigates the intricate regulatory environments to facilitate a smooth IPO journey.

• Global Partnership Network (GPN): Connect with our extensive network to enhance collaboration, growth opportunities, and access to international markets.

By partnering with TriC Global, your small business can effectively leverage capital markets to achieve growth, visibility, and long-term success.

Conclusion

The landscape of SME IPOs in India has evolved significantly since 2012, offering valuable lessons for small businesses aspiring to go public. By understanding investor priorities, ensuring comprehensive preparation, and leveraging expert advisory services, SMEs can navigate the IPO process successfully. TriC Global stands ready to support your journey with innovative IPO solutions tailored to your unique needs.

Ready to take your small business public? Contact TriC Global today!