Boss Packing Solutions SME IPO receives over 135x subscription. Details here

Despite market regulator Sebi's manipulation warning, retail investors continued their approach towards SME IPOs. The SME (Small and medium-sized enterprise) initial share sale of Boss Packing Solutions Ltd was one such case as the issue received 135 times subscription.

Prior to this, Resourceful Automobile's IPO recorded massive bids worth Rs 4,800 crore for an offering of just Rs 12 crore.

Boss Packing Solutions, which supplies packaging machines, labelling, capping, and filling equipment, had an issue size of a little over Rs 8 crore. Yet, it received bids worth Rs 1,073 crore.

The SME issue opened for subscription on August 30 and closed on September 3. The price was set at Rs 66 per share.

The company's financials are not particularly strong, with profits remaining flat for both 2022-23 and 2023-24, according to Boss Packing's Red Herring Prospectus (RHP).

The Ahmedabad-based company operates out of a modest 500-square-yard facility. Its net debt has also increased significantly, rising by 82 per cent to Rs 3.06 crore in 2023 from Rs 1.64 crore in the year-ago period.

Despite these red flags, retail investors seem undeterred, chasing what they believe could be quick and substantial returns.

The SME IPO sector has been booming, with the BSE SME IPO index rising by 136 per cent this year as against benchmarks Sensex's 14 per cent gains.

Sebi has recently advised 'intermediaries' aiding the SME listings, urging them to say 'no' to potentially problematic issuers.

According to SEBI Whole-Time Member Ashwani Bhatia, some SME promoters offer chartered accountants and merchant banker fees as high as 25 per cent of the initial public offer issue size.

"In the recent past, there has simply been no checks and balances," Bhatia said, adding that, "SME primary market avenue must know that if they take shortcuts, inflate their balance sheets, or any other such thing, then their relationship with the securities market will be short-lived."

SEBI had in July set a 90 per cent listing gains cap on SME IPOs. This was followed by a two-page advisory in the last days of August where the regulator warned of unscrupulous SME promoters.