Tightening the Screws

SME IPOS could see tighter regulations from Sebi in the not-so-distant future

- ASHISH RUKHAIYAR

THE BSE AND the National Stock Exchange (NSE)—two stock exchanges of the country—launched their respective dedicated segments for listing small and medium enterprises, or SMEs, in 2012.

Now, 12 years later, the segment—that has much more lenient listing and disclosure norms compared to the main exchange or the main board—has seen nearly 950 SMEs get listed, with the cumulative fundraising pegged at nearly ₹14,700 crore.

The vibrancy of the segment can be gauged from the fact that 2023 was a record year both in terms of the number of initial public offers (IPOs)—182—and the amount raised—a whopping ₹4,686.11 crore, as per data from Prime Database.

While the platform does provide the much-needed launchpad for the vast SME community of the country, it has also attracted the attention of the capital markets regulator, the Securities and Exchange Board of India (Sebi), albeit for the wrong reasons.

Recently, Sebi Chairperson Madhabi Puri Buch said that the regulator has reasons to believe that certain entities are misusing the segment with the express intent being price manipulation.

“Are there some entities that are perhaps misusing that facilitative framework? We have received feedback that that is the case,” said Buch at an event earlier this month.

“The reality is that these are relatively small entities, the market cap is small, and the free float is small. It is relatively easy to manipulate both at the IPO level and the trading level,” she added.