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    SME Corner

    Genesis Of SME Exchanges in India

    1990 - 2010Early Beginnings
    2012Launch of SME Exchange
    2013 - 2022Growth Phase
    2023 - PresentPost-Pandemic Resurgence

    This timeline highlights the key milestones and growth of SME IPOs in India, showcasing the sector’s evolution and increasing importance in the stock exchanges.

    The Foundation of SME IPOs in India

    1990
    In the mid-1990s, the Over The Counter Exchange of India (OTCEI) was established.

    2010
    In January 2010, the Prime Minister's Task Force recommended the creation of a dedicated stock exchange platform for SMEs.

    Launch of Dedicated SME Platform

    2012
    The BSE was the first to launch its SME platform in India in 2012.
    In the  same year, 14 SME IPOs were conducted, raising 127 crore INR.

    Expansion of SME IPOs in Indian Markets

    2016
    67 SME IPOs were conducted, raising 562 crore INR.

    2018
    144 SME IPOs were conducted, raising 2,409 crore INR.

    2021
    Due to the pandemic,
    the number of SME IPOs significantly dropped to 59.
    Despite the decrease in IPOs, 787 crore INR was raised that year.

    Current Trends in SME IPOs

    2023
    Post-pandemic, there was a surge in the number of SME IPOs.
    182 SMEs went public, raising 4,967 crore INR.

    2024
    In the current  year, SME IPOs reached their highest level, marking a significant increase in both the number of companies going public and the capital raised.

    Benefits of SME IPO for Companies

    Secure Capital for Expansion and Long-Term Working Capital

    An SME IPO provides companies with the necessary funds to expand their operations, invest in new projects, and cover long-term working capital needs. This influx of capital can fuel growth and enable the business to scale more effectively.

    Reduce Debt Burden

    Proceeds from an IPO can be used to pay down existing debts, improving the company’s financial health and reducing interest expenses. Lower debt levels also enhance the company’s balance sheet and financial stability.

    Improve Credit Rating and Lower Financing Costs

    With reduced debt and a stronger financial position post-IPO, companies often see an improvement in their credit ratings. A better credit rating can lead to lower financing costs and more favorable terms for future borrowing.

    Wealth Unlocking for Founders

    An IPO allows founders to unlock the value they have built in the company. By selling a portion of their shares, they can unlock wealth that was previously tied up in the business.

    Wealth Creation for Shareholders

    Listing on an exchange creates liquidity for existing shareholders, providing them with opportunities to sell their shares at market value. This liquidity can lead to significant wealth creation for early investors and employees holding equity.

    Export Opportunities

    Post-listing, companies may find it easier to establish credibility and enter international markets, thus enhancing their exporting capabilities. Being publicly listed can increase trust and reduce perceived risks among foreign partners and customers.

    Motivating Employees through ESOPs

    An IPO allows companies to offer Employee Stock Ownership Plans (ESOPs), which can be a powerful tool to attract, retain, and motivate employees. ESOPs align employees’ interests with those of the company, promoting a sense of ownership and commitment.

    Elevate Company Profile Across Stakeholders

    Going public raises the company’s profile and enhances its reputation among customers, suppliers, and business partners. This increased visibility can lead to more business opportunities and stronger relationships with stakeholders.

    Enhance Sales Volumes

    A public listing can enhance the company’s market presence and credibility, potentially leading to increased sales volumes. Customers and clients may view a publicly traded company as more reliable and stable, boosting business growth.

    IPO vs. Other Financing Options

    An Initial Public Offering (IPO) stands out as the superior choice for companies seeking substantial growth and long-term benefits. 

     For small and medium scale companies, previously dependent solely on debt financing, the shift to an IPO can be transformative. Reliance on debt often leads to significant monthly EMI payments, straining cash flows and financial health. By pursuing an IPO, these companies can secure the funds needed to turn cash flows positive, alleviating the financial burden and setting the stage for sustainable growth. This capital infusion can be used for expansion, research and development, and other strategic initiatives. 

    Moreover, the valuation unlocking benefits are highest in the case of an IPO, as public markets often provide higher valuations compared to private funding sources.

    While the IPO process involves higher initial costs and regulatory compliance, the long-term advantages of increased capital, market presence, financial flexibility, and maximum valuation unlocking make it a more attractive option compared to other financing alternatives.

    Please note that Unifint Capital Advisors is registered as Unifint Capital Advisors LLP. Wherever “Unifint” or “Unifint Capital Advisors” is mentioned, it should be construed to refer to Unifint Capital Advisors LLP.

    © 2024, Unifint Capital Advisors LLP, All rights reserved.

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