At­trac­tive re­turns drive FIIs, hedge funds to in­vest in SME com­pa­nies

The Hindu Business Line - - FRONT PAGE - SURESH P IYEN­GAR

For­eign in­sti­tu­tional in­vestors and hedge funds par­tic­i­pat­ing in the ini­tial pub­lic of­fer­ing made on the small and medium en­ter­prises (SME) ex­change plat­forms is fast gain­ing trac­tion.

In­vestors are flock­ing to SME stocks as the re­ward for the risk taken on the SME plat­form is more at­trac­tive than the stocks on the main board.

Ma­havir Lu­nawat, Man­ag­ing Di­rec­tor, Pan­tomath Group, said for­eign in­vestors and hedge funds have been ac­tive in­vestors in IPOs of com­pa­nies list­ing on the SME plat­form, hav­ing in­vested about ₹700 crore this year in IPOs.

Their role has be­come sig­nif­i­cant as the size of each is­sue on

Is­sued in

the SME plat­form has in­creased to ₹30-40 crore from ₹7-8 crore last year, he said.

Some of the for­eign in­sti­tu­tions that have par­tic­i­pated in the IPOs floated on NSE Emerge in­clude Ku­ber In­dia Fund, Maven In­dia Fund, Elara In­dia Op­por­tu­ni­ties Fund and An­chor Global Op­por­tu­ni­ties Fund while Cat­e­gory III Al­ter­na­tive In­vest­ment

Is­sue price (₹) Aug 29 close (₹) % change

Fund EW Clover Scheme has also in­vested in a re­cent IPO.

Phe­nom­e­nal re­sponse

To­tal Trans­port Sys­tem, which launched an IPO to raise ₹17 core by list­ing on NSE Emerge at­tracted in­vest­ment in­ter­est of ₹2,200 crore and was over­sub­scribed 130 times. Sim­i­larly, In­foBeans Tech­nolo­gies re­ceived bids worth ₹1,150 crore while it was in the mar­ket to raise just ₹36 crore. “The NSE ini­tia­tive to pro­vide hand-hold­ing and do the nec­es­sary due dili­gence of com­pa­nies list­ing on the Emerge plat­form has given the much­needed com­fort to for­eign in­vestors and hedge funds to park money in IPO,” said an NSE spokesper­son. Small com­pa­nies are find­ing it more con­ve­nient to raise money through the ex­change plat­form as bank fi­nance to SMEs has shrunk af­ter the surge in bad loans in the bank­ing sec­tor, he added.

In the last two months, eight com­pa­nies have listed on the NSE Emerge plat­form. On the whole, 76 com­pa­nies have raised about ₹912 crore. Of the 72 IPOs launched so far this year on the SME plat­form, 31 com­pa­nies from Gu­jarat raised ₹373 crore fol­lowed by 22 com­pa­nies from Ma­ha­rash­tra mop­ping up ₹257 crore.

Lu­nawat said some of the re­tail in­vestors are also con­sid­er­ing in­vest­ment through the sec­ondary mar­ket in stocks listed on the SME plat­form as part of port­fo­lio di­ver­si­fi­ca­tion.

Com­pa­nies that were listed on the SME plat­form this year are from var­ied sec­tors such as fi­nance, me­dia and en­ter­tain­ment, real es­tate and in­fras­truc­ture, man­u­fac­tur­ing, agri­cul­ture, aqua­cul­ture, food and food pro­cess­ing, and IT and IT-en­abled ser­vices.

The BSE and NSE had launched the SME plat­form in March 2012.

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