SME IPO Frenzy A ‘Froth’ In Primary Markets: Gurmeet Chadha

SME IPOs have recently become the talk of the town, but some “not-so-good names” are also entering this space to make quick money, according to Gurmeet Chadha, managing partner and chief investment officer at Complete Circle.

Speaking to NDTV Profit, Chadha said the SME IPO frenzy was just “froth in the primary market”, especially with SEBI’s recent call for caution while investing in SME IPOs.

“This is clearly a froth (in the primary market). I know some of the Delhi-based companies. Some of them do very basic civil work, they are launching an IPO. Someone doing pipe-fitting is talking about water management. I think in a lot of cases the numbers even look a bit tricky,” Chadha said.

Last week, SEBI issued a warning, cautioning investors against investments in SME companies. 

The markets regulator said the promoters of some of these companies were engaging in practices that created an unrealistic picture of their operations.

Days later, SEBI’s whole-time member, Ashwani Bhatia, also asked bankers, CAs and exchanges to exercise caution amid the SME IPO boom.

Chadha agreed with SEBI’s advisory and added, “I’m not saying all SME IPOs are bad, it would be bad to generalise them. There are obviously a lot of good ideas, but some not-so-good names with the purpose of making quick money are also coming in.

The Complete Circle CIO said he did not blame the promoters alone, rather investors were equally to blame. 

“You have to be careful because you don’t know when the music stops,” Chadha warned.

The market expert was bullish on Zomato Ltd., which he said was the only stock his company had added to its portfolio post-listing. 

“The turnaround for us was quick commerce. They are already reporting a Rs 1,000 crore kind of revenue. My sense is that a year from now that also should be Ebitda positive,” he noted.

He expected good growth from the company as well. “In food delivery, Zomato already has around eight crore transacting users. This growth could be 25-30%. I think quick commerce is something that can grow and has very long legs,” Chadha said.