Stock exchanges are exploring tougher regulations in light of the growing dispute about the SME market, according to various media sources. The standards may include a minimum threshold for SME IPOs so that only large serious businesses enter the capital market and non-serious players do not use the platform.
Currently, there is no minimum size for SME concerns. However, exchanges may contemplate a minimum cap of Rs 30-50 crore for SME IPOs, depending on their own policies and data from previous listings and subscribers. According to a media report from Zee Business, exchanges are looking to tighten their approval processes.
Several types of investors are avidly partaking in the SME surge. However, because these small enterprises are easily controlled by major investors, there is a high possibility of price manipulation. According to Kresha Gupta, Director of StepTrade Share Services, strong exchange governance is critical to the SME exchange's long-term viability.
"Without such strict restrictions, retail investors are certain to lose money. We should consider stiffer regulations in SME exchange IPOs as a positive development rather than the end of the SME boom. These laws will help the market last longer, keep ordinary investors involved, and ensure that it expands at a consistent, sustainable rate," she said.
Retail investors, drawn to potentially huge returns, may be especially vulnerable to such malpractices. Authorities want to protect their interests. Overall, the tighter attitude seeks to protect investors and increase transparency on the SME listing platform, ultimately benefiting the overall health and reputation of the SME market in the long run, he stated.
Exchanges are intending to strengthen measures, and there is no diktat from the capital market regulator Sebi. However, the market's watchdog had expressed concerns recently. This was interpreted as a strong signal for exchanges to guarantee that issues are not exploited.
SME IPOs have been accepted by the exchanges, but Sebi does not directly approve them. However, large subscriptions and substantial listing gains for SME issues grabbed the attention of numerous market experts, including Sebi, who expressed concerns about stock manipulation and overstated subscription data.
The goal is to bring SME issues up to par with mainboard issues in terms of disclosures so that investors' interests are protected. Merchant bankers of SME issues may receive more inquiries from exchanges. The issue's objectives and the financials of the SMEs that are raising funds will be closely examined. Issuers may also be asked to provide further upfront disclosures.
Exchanges and authorities in India are tightening the limits on the SME listing platform to prevent unscrupulous players from abusing it. Pace 360's Co-Founder and Chief Global Strategist, Amit Goel, stated that it has observed instances of companies diverting raised funds, distorting financial records, and misrepresenting facts in offer documents.
Sebi, the market regulator, is already probing the pattern of a few SME IPOs, as well as the role of merchant bankers and middlemen. The regulator is investigating the entire procedure. on the back of unprecedented enthusiasm for SME IPOs and potential abuse of the SME IPO method.
