'Outlook for 2026 is cautious yet constructive': Here's what analysts expect for SME IPOs after subdued 2025 performance

SME IPOs

• SME IPOs saw many muted or discount listings in 2025, causing investor losses
• Analysts expect cautious optimism and selective, quality-driven SME IPOs in 2026
• Returns in 2026 likely to favor niche businesses with strong fundamentals

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India’s primary market saw a subdued performance in 2025, but what was more notable were the muted listings of several SME IPOs. Analysts however have advised cautious optimism for SME IPOs in 2026.

SME segment saw a vast number of listings last year, with only a few showing sparkle. Several of these IPOs resulted in either muted or even discount listings, resulting in sharp losses for investors.

What are SME IPOs?

SME (Small and Medium Enterprises) IPOs are public offerings launched by smaller companies that meet specific criteria laid out by market regulator SEBI to raise capital and get listed on NSE Emerge or BSE SME platform.

These issues come with large lot sizes (usually more than Ra 1 lakh each) in comparison to mainboard IPOs (usually around Rs 14,000-15,000). Hence, these IPOs are often termed riskier bets as even small premium or discount can mean sharp returns or losses for investors.

Why SME IPOs failed to meet expectations in 2025?

The overall subdued performance of many SME IPOs in 2025 reflects a combination of broader market volatility, valuation discipline at the primary market level, and evolving investor behavior, said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.

“While debut premiums have been more modest or even negative in many cases, the depth of subscriptions in select offerings shows that appetite remains where fundamentals are strong,” he said.

What lies ahead in 2026?

The outlook for SME IPOs in 2026 is cautious yet constructive, said Tushar Badjate, Director and compliance officer, Badjate PMS.

While the broader IPO market remains supported by domestic flows and a stable economic environment, the SME segment is undergoing consolidation, the analyst said. “After strong performance between 2020 and 2023, returns moderated in 2025 due to a rise in listings, easier access to capital markets, and increased competition for investor money,” he explained.

Badjate however explained that for many SMEs, listing is more about visibility, formalisation, and growth funding than immediate returns. Given the small scale, large lot sizes, and limited liquidity, performance in this space remains highly business-specific, he added.

'Returns are unlikely to be broad-based'

“Going into 2026, returns are unlikely to be broad-based. Niche businesses with strong execution, sound governance, and sustainable demand are better positioned to outperform. For investors, profitability, cost economics, cash flows, and balance-sheet discipline should be the primary filters,” Badjate said.

He concluded that for SME IPOs, long-term outcomes depend on business quality, not listing-day excitement.

'Healthy pipeline of listings'

Maurya meanwhile said that for 2026, there is a healthy pipeline of listings, and capital mobilization is projected to grow. These lead to a selective but constructive environment for SME IPOs. “Investors will remain more discerning as they look toward business quality and long-term growth rather than just short-term listing gains,” he added.

Naren Agarwal, CEO of Wealth1, said that the SME IPO market is entering 2026 on a much healthier footing after a subdued and uneven performance in 2025. “Nearly half of the IPOs in 2025 listed at marginal premiums or discounts, which has reset investor expectations and valuation benchmarks. This cooling-off phase is constructive, as it discourages speculative listings and pushes companies to focus on profitability, governance and execution rather than just listing gains,” he said.

Looking ahead to 2026, the analyst expects a more selective but higher-quality pipeline of SME IPOs. Companies with consistent cash flows, scalable business models, cleaner balance sheets and transparent management are likely to attract investor interest, while weak governance stories may find it difficult to raise capital. Improving domestic liquidity, expectations of a stable interest-rate environment and stronger earnings visibility for small and mid-sized enterprises could gradually revive sentiment, he added.

SME IPOs in 2026 are unlikely to be treated as short-term trading opportunities as investors will increasingly evaluate return ratios, working-capital discipline and post-listing performance, Agarwal said. “Overall, 2026 could mark a transition from volume-driven listings to a more mature, fundamentals-led SME IPO market,” he concluded.

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