NSE Imposes Price Control Cap On SME IPOs
This new regulation is effective immediately and aims to standardise the opening price discovery process during the special pre-open session for SME IPOs
The National Stock Exchange (NSE) has implemented a price control cap of 90 per cent on SME initial public offerings (IPOs) to curb excessive speculation in the small and medium enterprises (SME) segment.
This new regulation is effective immediately and aims to standardise the opening price discovery process during the special pre-open session for SME IPOs, limiting the opening price to a maximum of 90 per cent above the issue price.
The NSE’s decision comes against a backdrop of concerns about the frothy conditions in the SME stock market, where IPOs have been delivering extraordinary returns on their listing days. For example, Shivalic Power recently debuted on the NSE SME IPO platform with a 211 per cent premium, a trend that has become increasingly common. Financial influencers have been encouraging retail investors to participate in these IPOs, often based on grey market premium (GMP) recommendations.
The Securities and Exchange Board of India (Sebi) has also expressed concerns about potential manipulation in the SME space. Sebi chairperson Madhabi Puri Buch has highlighted instances where some issuers and bankers have misused the SME listing framework.
Recently, Sebi barred three SME companies from capital markets due to the misuse of funds raised through public offers. The regulator has advised retail investors to exercise due diligence and not be swayed by seemingly attractive returns.
