New Delhi, Jul 4 (KNN) The National Stock Exchange (NSE) has announced a new measure to regulate the pricing of Small and Medium Enterprise (SME) Initial Public Offerings (IPOs).

Effective immediately, a price control cap of 90 per cent over the issue price will be imposed on SME IPOs during the special pre-open session.

This decision comes in response to growing concerns about potential market froth in the SME segment.

The NSE, which serves as a primary regulator in India's capital markets, stated that the cap aims to standardise the opening price discovery process across exchanges for SME IPOs.

The new regulation applies exclusively to the SME segment and does not affect mainboard IPOs, relisted securities, or public debt offerings.

Recent market trends have shown SME IPOs yielding substantial returns on their listing days, with some stocks more than doubling in value.

For instance, Shivalic Power's recent debut on the NSE SME platform saw a premium of 211 per cent.

An analysis of SME IPOs in the first half of 2024 revealed that 39 per cent of issues at least doubled investor wealth from their offer price, with returns reaching up to 1,500 per cent in some cases.

This rapid appreciation has drawn significant retail investor interest, contributing to a 268 per cent surge in the BSE SME IPO index over the past year.

The Securities and Exchange Board of India (SEBI) has expressed concerns about potential manipulation in the SME space.

SEBI Chairperson Madhabi Puri Buch warned that some issuers and bankers may be misusing the SME listing framework, prompting the regulator to gather evidence following complaints of price manipulation.

In recent actions, SEBI has barred three SME companies from capital markets for alleged misuse of funds raised through public offers.

The regulator has also cautioned retail investors to exercise due diligence when investing in SME companies and not be swayed solely by the prospect of quick returns.

As the SME segment continues to evolve, regulatory bodies are working to balance growth opportunities with investor protection measures.

(KNN Bureau)