The gauge for small and micro enterprises (SME) has massively outperformed the Nifty 50 index in 2022 as investors lapped up on the shares of several SME companies in what was a volatile year for the markets.
The Nifty SME Emerge index has surged a whopping 70 per cent compared to 4 per cent gain in the Nifty 50 index. The top gainer in the Emerge index, MK Proteins, has surged a whopping 1,726 per cent massively outperforming stock performance of Mukesh Ambani-backed Reliance Industries and Gautam Adani-backed companies.
Reliance Industries rose 7.6 per cent in 2022 while Gautam Adani-backed companies like Adani Enterprises rose 125 per cent, Adani Green Energy advanced 42 per cent, Adani Ports gained 13 per cent, Adani Power rose 199 per cent and Adani Total Gas added 106 per cent.
Advertisement
MK Proteins is an Ambala-based vegetable refined oil maker. The scrip went from Rs 119 in December 2021 to Rs 2,219 in December 2022.
Bombay Metrics Supply Chain, a Mumbai-based company which provides services of managing manufacturing supply chain processes for original equipment makers (OEMs) and tier 1 customers, advanced 1,223 per cent to Rs 1,701 from Rs 128 in December last year.
Salasar Exteriors & Contour, which provides engineering and construction services, has climbed 670 per cent in 2022 to Rs 45 in December 2021.
Goldstar Power, DU Digital Global, Pulz Electronics, Shree Oswal Seeds and Chemicals, Lexus Granito, Bodhi Tree Multimedia, Globe International Carriers, Solex Energy, Network People Services Technologies and Foce India shares have also surged in range of 222 to 500 per cent.
Advertisement
The surge in SME Emerge index shows investors' growing demand for shares in the SME sector. Recently, Droneacharya Aerial Innovations on the SME platform attracted a very high demand for its shares during the three-day share sale which ended on December 23. The IPO was subscribed 243.7 times with retail portion getting booked 331 times.
The company sold shares in price band of Rs 52-54 per share in lot size of 10,000 shares. The shares got listed at Rs 102, almost doubling from IPO price and has been hitting upper circuits every day since listing. The stock is now up 179 per cent at Rs 150.55 on the BSE.
Major reason for surge in Droneacharya stock price is due to the business it caters to. The stock is in defence space and given the government's focus on investment in defence sector it has benefitted from that like other defence related shares, analysts said.
The SME Emerge index is composed of select small and micro enterprises whose post-issue paid up capital does not exceed Rs 25 crore.
So What Made These SMEs So Attractive For Investors?
On the SME platform, at times, investors get very good companies at very cheap valuations, says market expert Avinash Gorakshakar.
“It is a hunting ground for value buyers. When you get companies with good promoters and sound businesses at attractive price and later stock price appreciation takes place and that leads to surge in the index value. That is the reason why HNIs are entering this space veteran investors like Ramesh Damani and Radhakishan Damani are looking at SME companies very closely. Recently, ace investor Ashish Kacholia invested in Knowledge Marine Engineering Works, which is listed on BSE SME platform at around Rs 700,” says Gorakshakar.
Advertisement
However, he points out retail investors miss out on investing in micro caps because of large lot size of stock that one needs to buy.
“In micro cap there is one problem that these companies have bigger lot sizes so retail investors do not enter this space and it is like private equity (PE) investing,” he adds.
