NACDAC Infrastructure’s recent SME IPO has taken the market by storm, becoming one of the highest-subscribed issues in the SME segment. Open for subscription from December 17 to December 19, the IPO garnered an overwhelming response, with total bids reaching an astounding ₹14,385 crore, vastly exceeding its issue size of just ₹7 crore. This translates to an oversubscription of 2,055 times, according to exchange data.
Retail investors led the charge, contributing ₹8,237 crore in bids, while the Non-Institutional Investor (NII) segment accounted for ₹5,718.24 crore, and Qualified Institutional Buyers (QIBs) added ₹236.39 crore.
The issue price for the IPO was set between ₹33 and ₹37, with the minimum lot size for retail investors set at 4,000 shares, requiring an investment of ₹1,40,000 to participate.
Grey Market Premium (GMP) Signals Strong Listing Gains
As per market observers, the grey market premium (GMP) for NACDAC Infrastructure IPO is ₹32 per share, suggesting a likely listing price of ₹67, which is a 90% premium over the issue price of ₹35. This indicates strong demand for the stock, reflecting positive market sentiment towards emerging companies in the SME sector.
About NACDAC Infrastructure
NACDAC Infrastructure is a core construction company with expertise in civil and structural services. Its portfolio includes multi-story building construction, electrical works (both low-tension and high-tension), steel structure works, bridges, and related services. As of March 31, 2024, the company employed 27 individuals, according to its Red Herring Prospectus (RHP).
Growing Popularity of SME IPOs
The SME IPO segment has gained significant traction in recent years, particularly in 2024. Despite stricter regulations imposed by SEBI and exchanges, retail investors continue to flock to these offerings, drawn by the potential for high listing gains and the growth prospects of emerging businesses.
Unlike large-cap IPOs, which tend to attract conservative investors, SME IPOs cater to investors with a higher risk appetite. These companies, often smaller with a lower market cap, offer rapid growth potential that appeals to those willing to take on more risk.
NACDAC success mirrors the soaring demand seen in other recent SME IPOs, such as Resourceful Automobile, which saw ₹4,000 crore worth of bids for a ₹12 crore offering, and Toss the Coin, which garnered ₹6,261 crore for a ₹9.17 crore IPO. These record subscriptions underscore the growing popularity of SME IPOs in India dynamic equity markets.
SEBI’s New Measures to Enhance SME IPO Quality
In light of the rapid growth of the SME market, SEBI has introduced new regulations to improve the transparency and quality of SME IPOs. The measures are designed to tackle governance issues, fund utilization, and improve investor protection.
Under the updated rules, companies wishing to list on SME exchanges must show an operating profit of at least ₹1 crore in two out of the last three financial years. Additionally, selling shareholders will be restricted to offloading no more than 50% of their holdings during the IPO process.
The updated regulations also prevent companies from using IPO proceeds to repay loans from promoters, directors, or related parties, ensuring that funds are used to support the company growth and development.
The surge in SME IPO interest is a testament to India dynamic equity market, with investors eager to capitalize on the growth potential offered by these emerging companies.
