Pricing Mechanism Evolution and Capital-Raising Efficiency in Emerging SME Equity Markets: Evidence from India's Book-Building Transition (Research Square)

Summary

• Indian small and medium-sized enterprises employ over 110 million people, generate nearly 48 per cent of exports, and contribute approximately 30 per cent of GDP.p.2
• Pricing mechanism adoption changed significantly across listing years, transitioning from a fixed-price majority of 53.9% in 2021 to a book-building majority of 81.9% in 2025.p.16
• Average listing-day initial returns showed no statistically detectable difference between fixed-price issues (38.96%) and book-building issues (38.66%).p.17
• Annual mean subscription ratios varied considerably across the study window, rising from 141.9× in 2021 to a peak of 233.9× in 2024, before falling to 70.55× in 2025.p.18

Key insights

1. The transition to book-building pricing reached majority adoption in 2023 when its share reached 54.4% of total SME IPO listings.p.16
2. All 17 extreme subscription demand observations exceeding 500× in the market were book-built issues.p.21
3. Book-building issues were substantially larger prior to the market shift, averaging Rs. 286.8 Cr compared to Rs. 45.13 Cr for fixed-price issues during 2021–2022.p.22
4. The observed market trajectory supports Stage 2 of the proposed Temporal Efficiency Convergence framework, where institutional adoption shifts structurally while return differentials have not yet converged.p.24