Indian SME IPO Crisis Highlights Market Challenges

Phytochem Remedies, a Jammu-based packaging company, has withdrawn its Rs 38 crore SME IPO due to undersubscription, highlighting significant challenges facing small and medium enterprises in India's capital markets.

The IPO garnered only 62% subscription with 797 bids for approximately 23.1 lakh shares, totaling around Rs 22.63 crore, far below the required amount. Chairman and Managing Director Niranjan Surana cited unfavorable market conditions and volatility as key factors behind this decision, expressing concerns about overall investor sentiment.

The proposed listing on the BSE SME platform was initially scheduled for December 26, but the lack of interest in the offering reflects a cautious sentiment towards SME IPOs amid tighter regulations. The minimum investment for retail investors was set at Rs 2.35 lakh, requiring bids for at least 2,400 shares, which may have limited participation further.

This incident raises alarms about investor confidence in the SME sector, particularly given that the broader IPO market had seen a record high in 2025, with companies raising a total of Rs 1.76 trillion, according to Business Standard.

Despite this overall growth, the performance of smaller firms like Phytochem illustrates the disparities in market sentiment, especially when compared to the strong demand seen for larger IPOs. The SME segment had previously seen a record of 252 SMEs raising 11,400 crore in 2025, indicating a mix of interest and caution among investors, as highlighted by varying subscription levels and market performances across different offerings.