The SME IPO frenzy, 2020 to 2026: what happened after the listing pop

In August 2024, a Delhi dealership raised ₹12 crore in an IPO. An IPO, or initial public offering, is the first time a company sells shares to the public. This dealership sells Yamaha motorbikes from two showrooms, and it had 8 employees at the time. Investors asked for roughly 400 times as many shares as it was selling. Their bids were worth about ₹4,800 crore.¹ Two years later, its shares sell for about 64% less than the IPO price that investors paid. The whole company is now worth about ₹11 crore, a little less than it raised. There is no suggestion of wrongdoing. The case shows how far investors’ excitement had run ahead of the business.

That was the SME IPO frenzy, a burst of wild excitement over small-company IPOs. SME stands for small and medium enterprises, or smaller businesses. NSE and BSE are Indian stock exchanges, the markets where people buy and sell shares. Each has a separate section for smaller companies, called an SME platform. NSE’s is called NSE Emerge, and BSE’s is called BSE SME.

During the frenzy, small companies listed on these platforms, and crowds of retail investors rushed to buy their shares. Retail investors are ordinary people investing their own money. A company’s first day of trading is called its listing day. A jump in its share price that day is a listing pop.

I first show how big the frenzy got. Then I turn to the question that matters most for investors: what happened to these stocks after their first day?

How big the boom got

Calendar years, NSE Emerge and BSE SME combined. *2026 up to 16 September.Source: Prime Database; Business Standard for 2026

In 2020, only 27 SME IPOs took place, and they raised ₹159 crore in total. In 2025, 267 SME IPOs raised ₹11,430 crore.² Small companies now make up about 7 in 10 of all IPOs in India. But they bring in only about 6% of all IPO money.

Investors wanted far more shares than the companies were selling. In the financial year 2023-24, which in India runs from April to March, SME IPOs tried to raise ₹5,971 crore. Investors put in bids worth about ₹5.6 lakh crore. That is roughly 94 rupees bid for every rupee on offer.³

In 2024, the average SME IPO was oversubscribed 193 times. That means investors asked for 193 times as many shares as it was selling. It drew 1.88 lakh applications from retail investors. On its first day of trading, its share price jumped 60%.⁴

What I measured

This part of the post uses results from my working paper. A working paper is a research paper that is still being worked on. I studied 517 IPOs that listed on NSE Emerge between January 2020 and September 2026. I tracked each one’s share price from its listing day onward.⁵

A share price can rise and still do worse than the market. To keep the comparison fair, I compared each IPO with the NIFTY SME EMERGE index. An index is a single number that follows the prices of a group of stocks. This one tracks the SME market as a whole. If the SME market rose 20% over a year and an IPO rose 5%, that IPO lagged by 15%. To lag means to fall behind. In the charts that follow, a bar below zero means the typical IPO fell behind the index.

By the typical IPO, I mean the median one. Line up all the IPOs from worst to best, and the median is the one in the middle.

After the pop, the typical IPO fell behind

The typical (median) IPO's return from its listing-day close, minus the NIFTY SME EMERGE index over the same period.Source: My working paper, from NSE public data

After the first day, the typical SME IPO kept falling behind the SME market. A year after listing, it was 31% behind the index. About 6 in 10 IPOs were behind the index at every point I checked.

The average looks better. On average, the IPOs were ahead of the index after a year. The reason is that a handful of huge winners pull the average up. For most investors, the typical outcome is the more useful number.

Like a lottery

In an oversubscribed IPO, there are not enough shares to go around. The investors who get shares are allotted them at the IPO price. Measured from that price, a year after listing:

• 39% of the IPOs were below their IPO price.
• 33% had more than doubled.
• The best 10% of IPOs produced two-thirds of all the gains.

The results look like a lottery, where a few tickets win big and many lose. The few big wins make the whole game look better than the typical ticket. The typical investor who was allotted shares still came out ahead, mainly because of the first-day jump. But that jump goes to the people who got shares in the IPO. Someone who buys on listing day pays the higher price after the jump. Then, typically, they watch the stock fall behind the index.

The biggest jumps were among the worst

I sorted the IPOs by their first-day jump and split them into five equal groups. Then I checked how each group did against the SME index over the next year.

IPOs grouped into five equal groups by listing-day gain. 430 IPOs with a full year of trading.Source: My working paper, from NSE public data

The worst two groups were the flops and the stars. The flops did not rise above their IPO price on their first day. The stars jumped 92% or more on day one. Over the next year, the typical star fell 34% behind the SME index. The IPOs that did least badly had a medium-sized first-day jump of about 12% to 35%.

A huge listing pop was not a sign of a great company. If anything, it suggested the excitement was already included in the share price.

Regulators crack down and the frenzy cools

Regulators make and enforce the market’s rules. They saw the froth building, with prices pushed up by excitement. SEBI is India’s stock market regulator. In March 2024, the head of SEBI said SEBI was seeing signs of price manipulation in SME stocks.⁶ Price manipulation means pushing a share price up or down on purpose to trick other investors. In July 2024, NSE limited the first price at which an SME IPO could trade on its first day. The limit was 90% above the IPO price. In December 2024, SEBI’s board approved tougher rules. They took effect during 2025:

• Companies need an operating profit of at least ₹1 crore in two of the three previous years. Operating profit is the profit a company makes from its main business.
• In an IPO, the company’s existing shareholders can sell at most 20% of the shares on offer. Each of them can sell at most half of the shares they own.
• Companies cannot use IPO money to repay loans from promoters or related parties. Promoters are the people who control a company. Related parties are people or firms closely linked to the company or its promoters.
• From July 2025, the smallest IPO application allowed went up to two lots, worth more than ₹2 lakh. A lot is a fixed bundle of shares. This shut out the smallest bids.

SEBI also acted against individual companies. In an IPO, a company tells investors what it plans to use the money for. In several SME IPOs, SEBI’s orders found or alleged that IPO money was diverted away from the purposes promised to investors. In one case, SEBI ordered a full refund of the IPO money to investors before the shares began trading.⁷

The frenzy cooled. In 2025, the average SME IPO was oversubscribed 60 times, down from 193 times in 2024. The average first-day gain fell from 60% to 12%, and retail applications per IPO fell by about 70%.⁴ I also checked NSE data for NSE Emerge IPOs that ended their first day below their IPO price. By my count, that was 1 in 8 IPOs in 2024. In 2026 so far, it is 4 in 10.⁸ The SME index itself fell 36% from its peak in December 2024 to its low in March 2026.⁹

About this research: the results on what happened after listing come from my working paper. It studies every NSE Emerge IPO from 2020 to 2026 that I could match to clean exchange price data. The full paper will describe the method in detail.

Footnotes

1. Business Standard, Resourceful Automobile’s ₹12 crore IPO oversubscribed 419 times, 27 August 2024. The share price is the last traded price on or before 17 September 2026: ₹42.35 on 11 September, from BSE’s daily price file (the shares trade rarely). Market value is my arithmetic: about 26.6 lakh shares in issue after the IPO, at that price. The final subscription figure is reported as between 398 and 419 times. ↩

2. Prime Database press releases PR-350, PR-365, PR-374, PR-384 and PR-392; 2026 figure from Business Standard, 17 September 2026, citing Prime Database. The 7 in 10 and 6% figures are for 2025. ↩

3. RBI Bulletin, Fundraising by Indian Small and Medium Enterprises through IPO, 20 October 2025, based on Prime Database data. The ratio is my arithmetic. ↩

4. Prime Database, PR-384 and PR-392. These are simple averages across all SME IPOs on both exchanges. ↩ ↩²

5. Share prices from the NSE full bhavcopy archive; IPO details from NSE’s public issues record; index levels for NIFTY SME EMERGE from NSE’s index archive. The 12-month results use the 430 IPOs that had a full year of trading by September 2026. ↩

6. Business Standard, Seeing signs of price manipulation in SME segment: SEBI chief, 11 March 2024; Business Standard, SME IPO opening price to be capped at 90%, 4 July 2024; SEBI board meeting, 18 December 2024; SEBI ICDR (Amendment) Regulations, 2025; NSE circular of 18 June 2025 on the two-lot minimum. ↩

7. SEBI orders on Varanium Cloud (final order, 25 August 2026), Trafiksol ITS Technologies (refund order, 3 December 2024) and Synoptics Technologies (interim order, 6 May 2025). ↩

8. My calculation from the NSE full bhavcopy: the share of NSE Emerge IPOs whose listing-day close was below the IPO price was 12.5% in 2024, 32.8% in 2025 and 41.2% in 2026 up to 17 September. ↩

9. NIFTY SME EMERGE index, Nifty Indices historical data: all-time high close of 17,223.66 on 17 December 2024 and low of 11,025.80 on 30 March 2026. The index rose almost ten-fold from the end of 2020 to the end of 2024. ↩