Short Call: SME IPOs grab headlines even as many advise caution; Medi Assist Healthcare, CESC, Indegen in focus

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‘Fear of Missing Out’ may well be a term coined around two decades back but its relevance has never been higher than now as investors seem to be falling over one another to grab a pie of the SME segment of India.

The SME IPO segment was launched way back in 2012 but it has never grabbed more headlines as every other public issue seems to be creating a record in its own unique way.

Most recently, the IPO of Resourceful Automobile, which operates a mere two Yamaha showrooms in Delhi and has just eight employees, was subscribed more than 400 times. The current calendar year is galore with instances of SME IPOs attracting record subscription and then following it up with strong listing gains as well – a feat not many main board IPOs with better track record, disclosures and financials have been able to achieve.

There have been at least five SME IPOs this year that saw subscription of around 1000 times with the highest interest level shown by retail investors – there have been half a dozen SME IPOs this year with retail subscription in excess of 100o times.

This brings us to the most important question? And, perhaps the right time to remember a famous quote of former US Federal Reserve Chairman Alan Greenspan: “But how do we know when irrational exuberance has unduly escalated asset values…”
Market experts are divided on their views on the SME IPO segment with some saying that one cannot paint the entire arena with the same brush as there are good quality companies as well though the recent subscription and listing trend is perplexing to say the least. Regulators, policy makers and exchanges – NSE recently imposed a cap of 90% on listing day gains -- are closely monitoring the situation and one could expect some action in the coming days.

Medi Assist Healthcare (Rs 606.90, +8%)

The subsidiary announced the acquisition of a 100% stake in Paramount Health Services & Insurance TPA of Rs 311.8 crore.

Bull case: Acquisition is earnings accretive and will help consolidate leadership position and extract higher margins for Medi Assist, Nuvama writes.

Bear case: Near-term margin dilution in FY26 due to the acquisition before full recovery in FY27. Disruptions in information technology systems data breaches, changes in laws and regulations may dent profitability.

CESC (Rs 207.77, +10.1%)

The stock surged as multiple brokerages including Investec, Elara Capital and Axis Securities put a 'buy' call on the stock

Bull Case: CESC’s aggressive renewable energy expansion, with 3.2GW of solar-wind projects and a green hydrogen facility, aims to boost return on equity from 12 to 15 percent, enhancing cash flow and long-term growth potential.

Bear Case: CESC’s heavy investment in renewable energy and green hydrogen projects may strain financials and execution capabilities. Delays or cost overruns could impact returns, particularly if regulatory changes affect the profitability of its planned capacity additions.

Indegen Limited (Rs 562, -0.1%)

JPMorgan initiated coverage on the counter.

Bull Case: The company stands out among mid-sized IT services and BPO companies with industry-leading per capita revenue and profits. This reflects the company's strong value addition and effective use of technology in service delivery, despite its predominantly offshore operations.

Bear Case: The growth story faces key risks, including high client concentration, insourcing by top clients, shifts in the drug launch pipeline, regulatory challenges in the pharma sector, and potential market risk from more aggressive adoption of generative AI.

(With inputs from Veer, Harshita and Vaibhavi)