Small and Medium Enterprises (SME’s) act as stepping stones for any developing country. India being one of the fastest growing economies in this world, accounts for almost five crore SME’s in the country. With an aim to provide market access to the SME’s & an opportunity to investors to identify & invest in SME’s at an early stage, stock exchanges have established a separate platform through which SME’s can come up with Initial Public Offers (IPO’s). This has not only helped SME’s raise capital from the market & expand but has also helped investors acknowledge stocks that are giants in the making and invest in them at an early stage.
The interest of investors has been seamlessly increasing every year in the SME IPO’s, with 66 companies raising 540 crore rupees in the year 2016 and almost 132 SME’s raised 1785 crore rupees in the year 2017. Although, the SME IPO’s have become the next big thing in the stock market, there are a certain things that you should look for before investing in a SME IPO -
- Company’s background -
Background verification of the company is one of the most important factors to consider before investing in any SME IPO. You should be aware of the nature of the business that the company deals in. Also, the past track record of the company should also be considered before investing in its IPO.
- Future plans of the company -
This is another factor that plays a major role in deciding if the company would turn out to be profitable or not in the near future. You should be well versed with what would be the company’s future course of action. You should be aware of how the company is going to utilise its raised capital. Companies that have a global presence and a well-planned future course of action turn out to be profitable in the long run.
- Market value of the company -
This is one of the most critical factors to consider before investing in an IPO. You should be aware of the net worth of the company in the market. One of the easiest ways is to compare the company with its competitors & then analyze its price.
Some of the investors who have gained enormous returns from the SME IPO’s are, Jaspal Bindra (Former Standard Chartered Asia Chief), Madhusudan Kela & Sunil Singhania (Former Fund Managers of Reliance Capital) and many more. Most of the investors have been able to double the amount within a short span of time. According to a report, out of 38 IPO stocks that were listed in the FY18, 26 IPO’s have been able to outperform in comparison to other stocks.
One of the companies that has been listed on NSE Emerge & has shown tremendous growth in past years is Five Core Electronics. With consistent determination and proven track record, Five Core Electronics has become India’s largest manufacturer and exporter of Public addressing equipment’s. The company has established ten manufacturing units in the country & has been showing significant amount of growth in profitability year after year. According to a CNBC report, the company has set an example of good governance by becoming the only company to declare its quarterly results. The company declared its results with a PAT of 221.29 Lacs (approx.), which was widely appreciated by the media at large & the investors were also pleasantly surprised. The company’s income has been increased by 21% and has shown almost 50% of growth in its profits, this quarter, according to the report. The investors are eagerly waiting for the results of the September quarter and as per their growth rate, it can easily be assessed that their stock is definitely going to rise. So, all in all we can see a better future prospect for investors of Five Core Electronics.