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19 Nov 2024
The Securities and Exchange Board of India (SEBI) has advised Indian stock exchanges to exercise increased caution when approving documents for small and medium enterprise (SME) initial public offers (IPOs).
According to Moneycontrol, SEBI has instructed the exchanges to enhance their due diligence processes for SME IPOs, even if it slows the approval process. This move comes after NSE imposed a 90% price control cap on SME IPOs due to concerns about volatility in lesser-known SME stocks.
The market regulator aims to strengthen eligibility criteria to ensure only fundamentally strong companies list on the SME platform, which was launched in 2012.
SEBI Chairperson Madhabi Puri Buch noted that some issuers and bankers have misused the SME listing framework. SEBI is investigating complaints of price manipulation in the segment.
In 2024, about 120 companies have listed on the SME segment, with some experiencing significant listing day gains. SEBI has barred three SME companies from the capital markets for misusing funds raised through public offers and manipulating financial statements
SEBI also advised retail investors to exercise due diligence and not be swayed by seemingly attractive returns.
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