PRIME Database: More than a third of SMEs trading below issue price
More than a third of the 427 small and medium enterprises (SMEs) listed on the exchange platform since 2012 are trading in the red.
Parul April 20, 2020
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As per the data from PRIME Database, more than a third of the 427 small and medium enterprises (SMEs) listed on the exchange platform since 2012 are trading in the red. In fact, 76 of these companies have shed more than 75 per cent of their value over their offer price.
To elaborate, the BSE and the NSE had launched separate SME platforms in March 2012, after the Securities and Exchange Board of India (Sebi) came out with easier listing and disclosure guidelines to help small companies tap into the capital market.
Among the 247 actively traded scrips, 17 have shed more than 50 per cent this calendar year.
Meanwhile, about 40 per cent of the MSMEs have slid more than the Sensex, which is down 23 per cent year-to-date.
However, around 19 per cent i.e., 47 stocks have gained during this period despite the market turmoil. Analysing these firms can be a challenge as they are not tracked by analysts and there is not much information in the public domain. Which means investors are left to themselves when it comes to gauging the credibility of promoters.
Pranav Haldea, managing director, PRIME Database quoted, “the current turmoil is likely to have a significant impact on the share price of SMEs and upcoming issuances. The liquidity in these counters is not as strong as you would find on the mainboard. These companies are also less researched and have a lower number of investors which will compound the problem,” he added.
Some experts also believe that the need is to bring in priority investing from big institutional players and tweak the lot size to improve liquidity. Besides improved transparency, an IPO route for SMEs reduces their dependence on debt financing and helps them maintain their debt-equity ratio efficiently, said experts.