Since their launch in 2012, SME IPO platforms on India’s Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) — the BSE SME Exchange and NSE Emerge — have enabled small and medium enterprises (SMEs) to access public funding.
Together, these platforms have facilitated Rs 14,000 crore in funding, with nearly 43% raised in FY24 alone.
Established by the Securities and Exchange Board of India (SEBI), SME IPO platforms aim to support the growth of businesses that drive employment, innovation, and exports.
Global example of SME platforms
In the United States, the concept of a dedicated SME exchange is not as formalized as in some other countries, but there are platforms and initiatives that serve similar purposes like OTC Markets, Regulation A+, Crowdfunding etc.
What is an SME, and who is eligible for SME IPO Listing on BSE and NSE
Eligibility criteria
Why should you think of SME IPO as a method of raising funds?
Access to Capital — SME IPOs provide an alternative method for companies to raise significant capital from the public. Unlike traditional loans, equity funding through an IPO does not impose debt on the business, allowing SMEs to finance expansion, research, and development without the burden of interest payments.Enhanced Visibility and Credibility — Listing on a stock exchange significantly boosts an SME’s visibility and credibility. This increased recognition can attract potential investors, business partners, and customers, signaling that the company has met regulatory requirements and possesses growth potential.Liquidity for Shareholders — An SME IPO offers liquidity for existing shareholders, including promoters and early investors. This allows them to sell their shares in the open market, unlocking value from their investments and providing an exit strategy.Valuation and Growth Opportunities — Going public helps establish a market-determined valuation for the company, serving as a benchmark for future fundraising. The funds raised can be utilized for growth initiatives such as expanding operations, investing in new technologies, or entering new markets.
Healthcare — a key sector for SME fund raises
In the last 3 years Healthcare sector was the 3rd highest sector in which companies got listed in the SME exchange.
# Companies listed in SME Exhange in last 3 years
Amongst the Healthcare IPO in the last few years, listed below are the Top 10 fund raises (by issue size).
Case studies of Companies which raised money via SME IPO
Maitreya Medicare Ltd
Unique Aspects That Captured Attention
Strategic Location Advantage: Hospital is located in densely populated micro markets with a low presence of good-quality hospitalsExpansion Capabilities: The existing unit has the potential to expand further by 75 beds to make it 200 bed structure with quaternary care facilities like Organ Transplants, Robotics in near future.Experienced Management: The management team’s focus on following NABH guidelines reflects its commitment to quality and safety standards, which appeals to patients and investors alike.
Well-Defined Growth Strategy Outlined
Plan to establish another 125-bed hospital in Valsad, Gujarat, targeting advanced tertiary care services, which will strengthen its footprint across Gujarat.Operations & Maintenance (O&M) Partnerships: By leveraging O&M agreements, the company plans to efficiently manage new facilities and capitalize on its existing brand value without incurring heavy operational costs.
Trident Lifeline Ltd
Unique Aspects That Captured Attention
International presence: Company has a presence in 40 countries, including African, Latin America, and East Asian countries, with ~945 registered export market products, and ~2016 export market products are under registration.Contract manufacturing: Company follows an Asset-light third-party contract manufacturing model thus entailing limited direct investment in manufacturing capacities.Control over Procurement: Complete control over supply chain, procurement done by the company, including Raw Materials, Packaging
Materials.
Key Considerations Before Pursuing an SME IPO
Pre-IPO Preparation: SMEs should focus on reinforcing their financial reporting systems to ensure accuracy and transparency, which are essential for investor confidence. Establishing strong corporate governance is crucial to meet regulatory standards and attract credible investors. Additionally, a clear growth strategy and well-defined plan for fund utilization should be developed to demonstrate the company’s vision and potential ROI.
Timing Considerations: The success of an SME IPO heavily depends on favorable market conditions, positive sector outlook, and the company’s growth phase. Launching during a strong market and growth period can maximize valuation and subscription rates.
Post-IPO Focus: Once public, SMEs must prioritize regular communication with investors to keep them informed and engaged. Delivering on growth promises becomes paramount, alongside a sustained commitment to compliance standards to meet regulatory and investor expectations.
Conclusion
The SME IPO route presents a viable funding option for healthcare companies looking to scale operations and enhance market presence. While it comes with its own set of challenges, proper preparation and strategic planning can help healthcare promoters successfully leverage this platform for sustainable growth.
While SME IPOs can be a viable avenue for raising funds, promoters must tread carefully. The stigma surrounding SME IPOs often stems from perceptions of lower governance standards, limited liquidity, and the reluctance of mainstream investors to participate in such offerings. These challenges can impact a company’s ability to attract institutional investment and achieve favorable valuations in the future.
To overcome these barriers, promoters should focus on demonstrating robust corporate governance, maintaining transparency, and building a strong growth narrative that resonates with both retail and institutional investors.
For healthcare entrepreneurs considering this path, it’s crucial to assess company readiness, understand market dynamics, and build a strong foundation before embarking on the IPO journey. With the healthcare sector’s growing importance and increasing investor interest, SME IPOs could be the catalyst that transforms promising healthcare enterprises into industry leaders.
LoEstro Advisors is an investment banking firm specializing in sell-side fundraise and M&A advisory, along with a strong consulting arm. Recognized as the #1 financial advisor in education in India, we are the advisor of choice to India’s blue-chip education businesses.
Over the last four years, we have grown to be one of India’s largest (in terms of M&A transactions) homegrown boutique investment banks, with $1.2bn+ worth of combined deals closed across education, healthcare, consumer, and technology sectors.
