With the Securities and Exchange Board of India (Sebi) increasing scrutiny on share offerings from SMEs in recent months, the listing day gains in the segment have dropped considerably.
Over 41 stocks have been listed on the SME platforms of NSE and BSE since mid-September, when Sebi cracked down on Trafiksol ITS Technologies. The average listing day gains for these stocks were 23%, significantly lower than the average gains of 66% seen until then since the beginning of FY25, according to Prime Database.
A total of 171 companies have been listed on the SME platforms of NSE and BSE so far in FY25, raising a record Rs 6,085 crore. The year is expected to surpass the record set in FY24, when 196 SME IPOs mobilised around Rs 6,000 crore and got listed.
While only 18 of the 171 companies that made their debut this year closed below their issue price on the first day, the latest stock prices show that 58 are now trading below their respective issue prices.
Not surprisingly, the BSE SME IPO index is set to register its third consecutive month of decline in November. However, the index has only fallen by 7.4% over these three months and is still up 130% over the last year.
With listing gains of as much as 300-400% on some stocks, there has been a rapid increase in participation from retail investors and a surge in the number of SME issuers. This has drawn the attention of both Sebi and the stock exchanges.
On August 28, Sebi issued an advisory stating that it had observed a pattern where promoters inflated the stock prices of their companies by presenting a false picture of their business. The regulator has also issued orders against some companies involved in such practices.
The Sebi has issued a discussion paper proposing several changes, including increasing the minimum application value for SME IPOs, capping the offer-for-sale component to 20% of the issue size, and mandating the appointment of a monitoring agency to oversee the use of IPO proceeds.
This is not all. In an unprecedented move, the BSE was forced to defer the listing of Trafiksol ITS Technologies at the last minute after Sebi’s nudge due to unresolved queries regarding the use of IPO proceeds and other factors.
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