Listing Euphoria or Lasting Value? A Comparative Analysis of SME and Mainboard IPO Performance in India

Abstract

This study investigates the subscription demand, market adjusted listing day returns and one-year market adjusted returns of Small and Medium Enterprise (SME) and Mainboard initial public offerings (IPOs) in India and explains the factors that influence the one-year listing day returns.

The sample includes 291 IPOs comprising of 143 Mainboard IPOs and 148 NSE Emerge SME IPOs, listed on NSE between January 2015 and December 2024, where the issue size of the IPOs exceeds ₹1,000 crore and ₹30 crore, respectively. The returns have been adjusted for Nifty 50. Welch's t-test and Mann–Whitney U test are used to test group differences. The one-year returns are inferred using OLS (heteroskedasticity-consistent HC3 errors), median (quantile) regression, interaction model and a logit model for the probability of outperforming the index.

The findings indicate that the SME IPOs were on average over-subscribed by 97.4 times whereas the Mainboard IPOs were over-subscribed by 30.4 times (p < 0.001). 84.5% of IPOs on the SME segment and 71.3% of IPOs in the Mainboard segment outperformed the Nifty on the day of listing, with mean market-adjusted listing return for the two segments being 33.8% and 21.1% respectively (Welch p = 0.008, Mann–Whitney p = 0.010). The median one-year excess returns were similar across SMEs and non-SMEs (2.4% vs. −3.1%), while the median excess returns for SME IPOs were higher than non-SME IPOs (53.7% vs. 9.7%; Welch p = 0.027); the distributional difference was not significant (Mann–Whitney p = 0.162). Subscription, issue size, firm age and segment are not significant in relation to listing-day return and Nifty performance with regards to one year returns. The persistence of listing gains is some 2.5 times larger for SME IPOs.

Originality/value – This is one of the first research to compare both segments on a matched and 10-year long sample of data from the NSE, at two time horizons with market adjusted returns. It demonstrates that the premium for SMEs in the long run is a average effect, and not a "typical-investor" effect, because a small group of extreme winners causes the premium to be larger than it really is.