After a strong performance in 2024, small and medium enterprise (SME) initial public offerings (IPOs) have seen a marked decline in listing gains in 2025. The average listing gains of 105 SME IPOs across BSE and NSE platforms have dropped to nearly 10%, a steep fall from the around 60% gains recorded last year.

The subdued performance is largely due to increased market volatility, growing investor caution, and external pressures such as tariff-related uncertainties and geopolitical challenges.

Despite this moderation in immediate returns, India’s SME IPO market remains on a record-breaking trajectory in 2025. Riding the wave of investor interest and buoyed by the strong momentum of the past two years, the segment has seen robust activity. According to Prime Database, 105 SME IPOs have raised over ₹4,437 crore through listings on the BSE SME and NSE Emerge platforms so far this year, marking a significant surge in both volume and value.

This surge follows a blockbuster 2024, which saw 240 SME IPOs make their debut across both exchanges, mobilising over ₹8,760 crore, the highest ever in a calendar year since the segment’s inception in 2012. This was 65% more than ₹5,300 crore raised by 182 SMEs in 2023. The average issue amount has seen a fourfold jump in four years from just ₹9 crore in 2020-21 to ₹39 crore in 2024-25, according to data from Prime Database, a platform that tracks data on the capital markets.  

From Boom to Blip

In the current year (till July 3, 2025), the BSE SME saw 50 issues raising ₹1,803.90 crore, with average listing gains at 8.28% and average subscription levels of 58.71 times, says data from Prime Database. During the same period, NSE Emerge hosted 55 IPOs, garnering ₹2,633.45 crore, with average listing gains of 11.91% and average subscription levels at 59.23 times.

On the other hand, SME IPOs listed on the BSE delivered an average listing gain of 47.4% last year, while those on the NSE Emerge platform recorded an even stronger 64.6% average.

While market momentum remains strong, not all listings stay above the offer price. As of July 3, 2025, of the 50 SME IPOs listed on the BSE SME platform so far this year, 28 are currently trading below their issue price. On the NSE SME platform, 22 of the 55 listed IPOs have slipped below their offer price, indicating that valuation and sustainability are coming under greater scrutiny.

Launched in 2012 by the markets regulator, the Securities and Exchange Board of India (Sebi), the SME IPO framework intends to help small and medium enterprises access capital markets with lighter compliance requirements. Over time, it has evolved from a niche funding route to a mainstream enabler of India’s entrepreneurial ambitions. Companies with post-issue capital of up to ₹25 crore are eligible to launch SME IPOs on dedicated platforms such as BSE SME and NSE Emerge.

In the early years (2012-2016), total capital raised remained under ₹500 crore annually. By 2023, the BSE SME raised ₹1,309 crore while the NSE Emerge soared to ₹3,376 crore. In 2024, the momentum peaked, with the BSE garnering ₹1,923 crore from 66 IPOs, while the NSE mobilised ₹6,837 crore via 174 IPOs, says data from Prime Database.

The average issue size for SME IPOs has grown significantly over the years, especially on the NSE Emerge platform, which consistently outpaces the BSE SME in terms of deal size. The average issue size of NSE-listed SMEs rose from ₹20 crore in 2012 to ₹48 crore in 2025, compared with ₹5 crore to ₹36 crore on the BSE SME platform.

Investor enthusiasm was evident in the sharp rise in average subscription levels, particularly in 2024, when BSE SME IPOs were subscribed 234 times on average, while the NSE Emerge issues saw 177 times subscription.

The Road Ahead

As the appetite for SME listings continues to grow, both platforms-the BSE SME and NSE Emerge-have become vital avenues for small businesses seeking capital and visibility in public markets. However, investors are now seen becoming more selective, focussing on fundamentals and growth potential.

India’s SME sector, contributing nearly 30% of the country’s GDP and employing 60% of its workforce, is expected to remain a cornerstone of economic growth. The SME IPO route is emerging as an increasingly attractive alternative to venture capital and private debt, offering small businesses both funding and public visibility.

With market maturity setting in, experts believe the focus will now shift from hypergrowth to quality, governance, and liquidity management in the SME space.

Recently, the BSE and the NSE announced an overhaul in the bidding process for SME IPOs to standardise and streamline investor participation. Under the new framework, two lots will be the minimum bid, and applications must exceed ₹2 lakh, thereby phasing out smaller retail applications previously allowed under SME IPOs.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)