SME IPOs. Hyper performances?

The exchanges have written to the investment bankers to do more due-diligence on the issuers. SEBI has written to the stock exchanges to be more careful while clearing the SME IPOs. The finance ministry did the same a little while ago. While this may seem to be the game of passing-the-parcel among them. It is not so.?

The hyper performances by a large section of SME IPOs does raise a doubt. The seven investment bankers having received some ‘responses’, the delay in listing by one of them asked to ‘review’ the profits, does point towards that. But there is different story. Unless you jack up the figures, the poor SME would languish. It will have no takers. Thanks to the ecosystem being established, there is some demand. All this was done by investment bankers. The tree is bearing the fruits now

This happens in the mainboard too. Tell me a company which has not shown the jump in the topline and bottomline in the year of the IPO and I will show you ten which has! It is not that all SMEs are above board. It is the track record that matters. SMEs are generally the individual companies where the entrepreneur does many things, as stated in my earlier blogs. He/she has to act as a CEO, CMO, CHRO, CFO. From govt. official to the local goonda, he/she has to manage. Such is life. Life is hard. But the show must go on.

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On top of that, his/her clients do not pay on time. They squeeze him/her hard in bargaining. Money is in short supply.? The clients are compensating for their lack of their bargaining powers/capabilities with the clients/suppliers still bigger than them. The vicious cycle of ‘you are small because you are small’ is at play here. They are no different.

Therefore, it becomes difficult to sell the jewel he/she has so painstakingly curated. A few of them who do, deserve to be backed up. SME IPOs one of the ways through which SMEs do it. To caste an aspersion on it would be a little unfair. SMEs do it a heavy heart, not because it is the cheap form of money or it is available easily or that they want to get rich over-night. They sell their equity because no other form of money is available. The regulators must take note of that. In democracy, we have to ensure that hundred criminals may go scot free but one genuine guy should not be inconvenienced. That hundred criminals going scotfree is not a fault of that genuine fellow.

This is not to say that due - diligence should now be done. By all means, do it. This will prevent the fly-by-operators from getting in the space. But throwing the baby out with the bathwater should be avoided.

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