The Rise of SME Companies: Path to Becoming the Next Microcap and Smallcap Giants
Small and Medium Enterprises (SMEs) listed on the SME platform have showcased remarkable growth in the past few years, as evident from the data between 2021 and 2024. This sustained performance not only underscores their potential to scale but also positions many of them to transition into microcap and smallcap segments sooner than anticipated.
Source: Data as of 30-September 2024. Screener.com, Steptrade Internal Research, The above data is used to explain the growth of SME companies in India since Jan 2021.
Revenue Growth: A Key Driver
SMEs have experienced exponential growth in revenue post-listing. Here are the highlights:
1. 2021 Listings (54 Companies):
The average revenue surged from ₹47 crore in FY21 to ₹94 crore by FY24, marking a 26% annual growth rate.
2. 2022 Listings (108 Companies):
These companies exhibited a strong 31% growth, with average revenue climbing from ₹57 crore in FY21 to ₹129 crore by FY24.
3. 2023 Listings (177 Companies):
Companies listed in 2023 recorded the highest growth trajectory of 35%, with average revenues rising from ₹52 crore in FY21 to ₹126 crore in FY24.
4. 2024 Listings (202 Companies):
With 37% growth, these companies have already achieved an impressive average revenue of ₹138 crore by FY24.
Profitability: The Engine of Transformation
Profit growth has outpaced revenue growth, reflecting operational efficiencies and stronger bottom lines:
1. 2021 Listings:
Average net profit jumped from ₹1 crore in FY21 to ₹6 crore in FY24, a 63% annual growth rate.
2. 2022 Listings:
Profitability rose by 45%, from ₹2 crore in FY21 to ₹5 crore in FY24.
2023 Listings
A phenomenal 91% growth rate, with net profits soaring from ₹1 crore in FY21 to ₹7 crore in FY24.
2024 Listings:
These companies achieved 83% growth, with profits increasing to ₹8 crore in FY24.
Why SMEs Are Thriving
1. Access to Capital:
Listing on the NSE SME platform provides access to equity funding, reducing debt dependency and enabling expansion.
2. Operational Efficiencies:
Increased capital allows SMEs to adopt modern technologies and streamline operations, driving higher profit margins.
3. Market Visibility:
Public listing enhances credibility, attracting more customers and investors.
4. Sectoral Focus:
Many SMEs operate in niche, high-growth sectors like tech, healthcare, and renewable energy, aligning with emerging trends.
Future Potential: Transition to Microcap and Smallcap
With consistent revenue and profit growth, many of these SMEs are on the verge of entering the microcap and smallcap segments. Their financial metrics are improving rapidly, making them attractive to institutional investors and expanding their valuation multiples.
Conclusion
The data clearly illustrates that SMEs listed on the SME platform are becoming engines of growth in the Indian economy. By capitalizing on their operational efficiencies and market visibility, these enterprises are likely to evolve into microcap and smallcap entities, contributing to wealth creation and economic dynamism.
For investors, this underscores the importance of closely tracking the SME space, as many of these companies could deliver outsized returns in the coming years. Don’t miss out on the opportunity and be part of this growth story – start exploring investment options in SMEs today with Steptrade!
