The momentum builds on 2024, when the country saw a record number of initial public offerings (IPOs) raising an unprecedented amount of capital. The SME segment dominated then as well, with 245 companies mobilizing ₹8,761 crore.
That, however, is where the resemblance ends.
In 2024, retail investors drove a frenzy, pushing median subscriptions to a staggering 137 times, which translated into median listing-day gains of almost 40%. This year, the enthusiasm has vanished. Median retail subscription rates have collapsed to just seven times, and listing gains have evaporated, now hovering around only 4%, showed an analysis of primedatabase.com data. The reality of the secondary market has caught up to the hype of the primary market.
Mainboard IPOs also dwindled, but fared better than SMEs. Median listing gain dropped from 21% to 5%, while the retail subscription rate has nearly halved from 14% to 8% between 2024 and 2025.
The lost charm
Once the retail investor’s lottery ticket, SMEs seem to have lost their charm.
A volatile equity market has dampened speculative gains, while tighter regulations have curbed speculation itself that defined the 2024 SME boom. As a result, they have underperformed mainboard IPOs in 2025, noted experts. The “guaranteed listing pop” that once drew retail investors has disappeared—and with it, their enthusiasm.
“At its peak, there were 187,000 retail applications per SME IPO on average in 2024. Now it is 55,000,” said Pranav Haldea, managing director of capital market data provider PRIME Database Group.
The surge in SME IPO activity, accompanied by huge oversubscriptions and often unsustainable listing-day gains, raised several red flags for the regulator. So, to protect retail investors from speculation and ensure the financial stability of these firms, India’s market regulator introduced stricter regulations.
From 1 July 2025, new norms require SME issuers to post at least ₹1 crore in operating profit in two of the past three years, cap the promoter offer-for-sale at 20%, and prohibit repayment of promoter loans from IPO proceeds.
The Securities and Exchange Board of India (Sebi) has also raised the minimum retail bid size from ₹1 lakh to ₹2 lakh, banned the cut-off bidding strategy, and disallowed bid cancellations to rein in speculation. With these measures in place, the SME segment now faces its moment of reckoning.
The reality check
The distribution of SME IPO subscriptions captures this behavioural shift vividly. In 2024, not a single issue was undersubscribed, and over half (57%) drew more than 100 times retail bids. A year later, around 9% of issues have failed to get even fully subscribed, while only 21% saw triple-digit bets.
However, nearly half (48%) of the issues drew less than 10 times subscription in 2025—a sharp increase from just 4% in 2024—indicating that the speculative base has shrunk significantly, making way for more cautious subscriptions.
That said, about 28% of SME IPOs were subscribed between 10-50 times in 2025, up from 24% last year. This indicates that while the frenzy at the extremes has eased, a core set of investors is still showing selective optimism towards relatively stronger offerings.
This middle band represents the few investors still focusing on fundamentals, according to Apurva Seth, head of market perspectives and research at discount stock broker SAMCO Securities. “Most SME IPOs are either overpriced or of questionable quality,” he said. “Only a handful justify their valuations, and that’s where limited genuine interest now resides.”
The collapse in speculative intensity is nowhere clearer than in debut-day performance. In 2024, the market was rampant: 33% of SME IPOs gained over 50%, and close to 11% more than doubled their issue price. Fast forward one year, and that performance has evaporated. The analysis shows that only 12% have managed listing gains above 50%, and not a single IPO has doubled its issue price on its debut day in 2025.
Increasingly more issues are listing at muted gains or discount to their offer price: Around 36% of IPOs listed below their offer price this year, against only 11% in 2024.
Listing woes
Listing gains are typically higher in bull runs than in choppy markets, noted Haldia of Prime Database. “The average gain across SME IPOs fell from about 60% last year to barely 12% this year,” he said. “That in turn has pulled down retail applications.”
Moreover, National Stock Exchange’s decision to cap SME listing gains at 90% above the offer price practically killed the listing gain frenzy.
Meanwhile, if listing-day exuberance has faded, long-term performance tells an even grimmer story. Even before completing a year on the market, nearly 47% of the issues listed in 2025 are already trading below their issue price, the analysis showed. Similarly, 46% of issues listed in 2024 are now trading below their offer price. Altogether, close to half of the issues listed since 2024 are trading below their issue price.
At the extreme end, the share of multi-baggers (those with returns exceeding 100%) in the sample stood at 19%, while 15% of issues showed modest returns of 0-25%. Most SME stocks simply stop moving after listing, caught in thin volumes and narrow trading bands, noted experts.
“Liquidity dries up quickly once the hype is gone,” said Seth from SAMCO Securities. “A lot of SME counters barely trade after a few weeks. Without credible disclosures and real growth plans, these stocks are just stranded capital.”
This stagnation has intensified after Sebi’s latest curb on retail participation in SME IPOs this year, leading to even flimsier trade volumes in a fragile secondary market.
However, despite waning retail enthusiasm, the broader supply of SME IPOs hasn’t ebbed much. This apparent resilience stems from excess liquidity, said SAMCO Securities’ Seth.
Systematic investment plan (SIP) inflows into mutual funds remain robust, providing the cash cushion that keeps such IPOs afloat, he noted.
Experts said a steady supply of liquidity is still drawing SMEs to public markets, even if a structural softening in demand is underway.
