Another risk to the huge rise in small business shares this month is a series of accounting irregularities that Sebi discovered.

Initial orders issued by Sebi revealed that Varanium Cloud and Add-Shop E-Retail, both listed on the small and medium enterprises (SME) market, had altered their financial statements to support advances in their shares. The government has outlawed the founders' and firms' participation in stock market transactions.

The regulator warned about price manipulation in small initial public offerings (IPOs) earlier this year, which prompted the crackdown. The event, according to analysts, portends more stringent regulatory action, which might restrain future advances in the BSE SME IPO Index of micro listings, which has increased by more than 5,000% since the beginning of 2021.

"This is merely the beginning," market analyst Ambareesh Baliga remarked. "Fewer regulations were meant to attract good quality SMEs to the market... instead it has attracted the wrong ones."

In an order dated May 10, Sebi stated that the technology company Varanium Cloud had misappropriated cash from its 2022 initial public offering and had "manipulated its financial statements by recording fictitious sales and purchases."