SEBI To Release Discussion Paper On SME IPO Concerns Amid Unusual Market Activity

New Delhi, Oct 22 (KNN) India's market regulator is preparing to release a discussion paper addressing mounting concerns over Small and Medium Enterprise (SME) Initial Public Offerings, following unusual patterns in subscription rates and listing gains.

The Securities and Exchange Board of India (SEBI) has expressed discomfort over current market practices and disclosure standards in the SME segment.

SEBI Wholetime Member Ashwani Bhatia, speaking at the Morningstar Investment Conference, characterised recent developments in the SME IPO space as ‘disturbing.’

The regulatory body has noted particular concerns regarding investor participation patterns, market-making mechanisms, and underwriting practices in these offerings.

The move comes amid unprecedented activity in the SME IPO market, with several issues in the current year witnessing subscription rates exceeding hundreds of times their original size, and some surpassing 1,000 times oversubscription.

This surge in interest has drawn significant retail investor participation, despite the segment's minimum trading lot size being set at Rs 1 lakh.

The SME IPO market has already achieved record-breaking fundraising figures in 2024. According to Prime Database, approximately 205 SME IPOs have been launched through September, raising Rs 7,016 crore, substantially surpassing the previous year's total of Rs 4,687 crore.

While acknowledging the vital role of SMEs in the economy, Bhatia urged retail investors to exercise extreme caution when investing in this segment.

The forthcoming regulatory framework aims to enhance transparency and standardise disclosure requirements.

Both stock exchanges and SEBI are maintaining close surveillance to prevent price manipulation and fraudulent trading practices in SME listings.

(KNN Bureau)