NSE imposes price control cap of 90% on SME IPOs. Here's why

The decision comes amid concerns of froth-building up in below-the-radar SME stock.

The National Stock Exchange (NSE) announced imposition of a price control cap of 90% on SME IPOs. The decision comes amid concerns of froth-building up in below-the-radar SME stock. NSE said in a circular, “To standardize the opening price discovery/ equilibrium price across exchanges during special pre-open session for initial public offer (IPO) for the SME platform, it has been decided to put an overall capping up to 90% over the Issue price for SME IPOs.”

The price control cap of 90% will be applicable only to the SME segment and not to mainboard IPOs.

The price control cap of 90% will be applicable only to the SME segment and not to mainboard IPOs. The change- which will come into force from July 4- will also not be applicable to relisted securities or public debt.

This comes amid concerns over how SME IPOs are giving multibagger returns on listing day itself. For example: This week, Shivalic Power listed on the NSE SME IPO platform with a premium of 211%. In the first six months of 2024, 43 out of 110 issues have at least doubled investor wealth from their offer price, as per ET Markets. The returns have gone up in this period to 1500% which have made retail investors more and more interested in SME IPOs.

The BSE SME IPO index is on the verge of hitting the 1 lakh mark after rallying 268% in one year.

Earlier, Sebi chairperson Madhabi Puri Buch had warned of manipulation in the SME space as she said that some issuers and bankers were misusing the framework provided for SME listing. Sebi is collecting evidence following complaints of price manipulation in the segment, she had then said.