To ensure uniformity in the opening price discovery and equilibrium price for SME platform IPOs across exchanges, the Securities and Exchange Board of India (SEBI) has decided to impose a cap of up to 90 percent over the issue price for SME IPOs.
The National Stock Exchange (NSE) announced in a circular on Thursday, July 4, that the opening price of shares listed under the small and midsize enterprise (SME) category will be capped. According to the circular, effective immediately, shares listed under the SME segment may only be priced “up to 90 percent over the issue price.”
This 90 percent price control cap will exclusively apply to the SME segment and not to mainboard IPOs, as clarified by the NSE. The circular took effect on July 4, 2024.
The NSE has set an upper limit on the opening price of shares on its NSE Emerge platform, used for SME listings, to address concerns.
The announcement coincides with the listing of two SME IPOs at significant premiums this week. On July 1, Shivalic Power Control’s shares were listed at Rs 311 apiece, a 211 percent premium. On July 2, Divine Power Energy’s shares debuted at Rs 155, a premium of more than 287 percent.
SEBI has observed patterns of price manipulation. SEBI Chairperson Madhabi Puri Buch stated, “The market has advised us on how to identify and address such cases.”
SEBI is collaborating with advisors to comprehend and analyze the data. “Manipulation is simple both during the IPO and in subsequent years. Additional disclosure regarding risk factors is required,” Buch noted.