Reason for Resourceful Automobile IPO was in demand
- Last year sometime in August, a Resourceful Automobile IPO was in demand as it was subscribed to over 400 times including retail quota 496.22x, and NII 315.61x respectively.
- Resourceful Automobile had ₹105 GMP, expecting approx 75% listing gain to allotees.
- Resourceful Automobile IPO opened when the share market was booming.
- At that duration, most SME IPO provided approx 90% return along with High GMP.
- One of the main reasons for investors’ interest in Resourceful Automobile IPO was a high subscription which offered quick return potential to them.
Why did Resourceful Automobile IPO list flat?
The main issue was that the company had only two Yamaha showrooms and just 8 employees at the time of the IPO.
This information arrived at SEBI and the Resourceful Automobile received a warning from SEBI the day before listing. people expected that the IPO listing would be more than expected, and as a result, it was flat.
SEBI ‘s statement for investors-related investments
SEBI gave a strong announcement to investors related to oversubscribed SME IPO and optimistically presented companies, as there could be risk.
Companies must have made at least Rs 1 crore in operating profits (EBITDA) in two of the last three financial years. Also, Sebi has limited the offer-for-sale (OFS) portion in SME IPOs to 20% of the total size. Selling shareholders can’t sell more than 50% of their current holdings.
The regulator has also strongly focused on how IPO proceeds can be used. Companies are no longer allowed to use the funds to repay loans from promoters, directors, or related parties. This is to prevent misuse of the funds and ensure they are used for their intended purposes.
The SME IPO companies and their promoters might have unrealistic images regarding their operation.
Strong actions were taken by SEBI to pay dividends, however, this year subscriptions were suddenly dropped and GMP activity almost vanished. This year only 1 IPO was highly subscribed and that was 44x only.
