NACDAC Infra IPO: This SME issue garners over ₹14,000 crore bids for ₹7 crore offer; here’s what GMP signals

NACDAC Infrastructure IPO: The recent SME IPO of NACDAC Infrastructure has drawn significant attention, becoming one of the highest-subscribed issues in the SME segment. Open for subscription between December 17 and December 19, the IPO received bids worth an astounding ₹14,385 crore against the issue size of just ₹7 crore, translating to an oversubscription of 2,055 times, as per the exchange data. 

Retail investors led the demand, with bids totalling ₹8,237 crore, while the NII segment contributed ₹5,718.24 crore, and QIBs accounted for ₹236.39 crore.

The issue price was set between ₹33 and ₹37, with the minimum lot size for retail investors set at 4,000 shares, requiring a minimum investment of ₹1,40,000 to participate in the issue.

Today's grey market premium (GMP) for NACDAC Infrastructure IPO is ₹32 per share, as per the market observers, suggesting that the shares are likely to list at ₹67, a 90 per cent premium over the issue price of ₹35.

NACDAC Infrastructure is a core construction company specialising in a comprehensive range of civil and structural services. Its expertise spans multi-story building construction, electrical works (low-tension & high-tension), steel structure works, and bridges, including FOBs and ROBs, along with other related services. As of March 31, 2024, the company employed a workforce of 27, as per the RHP report. 

The SME IPO segment has seen remarkable traction in recent years, particularly in 2024, despite tighter regulations introduced by SEBI and exchanges. Retail investors continue to show strong interest in this category, attracted by the potential for substantial listing gains and the growth prospects of emerging companies.

Unlike traditional large-cap IPOs that typically attract conservative investors, SME IPOs are appealing to those with a higher risk appetite. Investors are drawn to the rapid growth potential these businesses offer, leading to oversubscription irrespective of their underlying fundamentals or business models.

This trend isn’t limited to NACDAC Infrastructure. Earlier, Resourceful Automobile, a Yamaha two-wheeler dealership with just two showrooms and a staff of eight, saw bids worth over ₹4,000 crore for its ₹12 crore IPO.

Similarly, Toss the Coin garnered bids of ₹6,261 crore for an IPO size of ₹9.17 crore. These stellar demands underscore the continued retail enthusiasm for SME IPOs, cementing their popularity in India’s dynamic equity markets.

In India, small businesses with annual turnover of ₹5 crore to ₹250 crore are listed on separate sections of the BSE and NSE. These companies have fewer disclosure requirements, and their offerings are vetted by the exchanges, unlike larger IPOs, which must be vetted by SEBI.

More strict rules for SME market

The capital markets regulator, SEBI, on Wednesday introduced a set of measures aimed at enhancing the SME IPO market quality, ensuring transparency, and safeguarding investor interests.

These revised regulations are designed to tackle issues related to governance, fund utilisation, and transparency, which have surfaced in the rapidly growing SME segment.

As per the updated norms, companies planning to list on SME exchanges must demonstrate an operating profit of ₹1 crore in at least two out of the last three financial years. Additionally, the regulations limit selling shareholders to offloading no more than 50% of their holdings during the IPO process.

SEBI has also tightened the rules on the usage of IPO proceeds. Funds raised through IPOs can no longer be utilised to repay loans taken from promoters, directors, or related parties, ensuring that the proceeds are directed towards business growth and development.

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