NSE Imposes 90% Cap on SME IPO Prices in Pre-Open Sessions

Image for: NSE Imposes 90% Cap on SME IPO Prices in Pre-Open Sessions

📷 Image Credits: Moneycontrol

On July 4, 2024, the National Stock Exchange (NSE) in India announced a significant move to regulate the pricing of small and medium enterprises (SME) initial public offerings (IPOs) during special pre-open sessions. The NSE has put a capping of 90% over the issue price for SME IPOs to standardize the opening price discovery and equilibrium price across exchanges. This new regulation aims to address concerns related to potential price manipulation and excessive volatility in the SME segment. The price control cap will only be applicable to SME IPOs and not for Mainboard IPOs, relisted securities, or public debt.

In a circular issued by the NSE, it was highlighted that the decision to implement the 90% cap will come into effect immediately on July 4, 2024. The move follows observations by market regulators regarding signs of manipulation within the SME segment, prompting the need for a more structured pricing mechanism. According to SEBI Chairperson Madhabi Puri Buch, the initiative intends to prevent misuse of the facilitative framework provided to SMEs by creating a more conducive listing environment.

The announcement from NSE comes in response to the surge in SME IPO investments seen in the previous year, with 176 companies raising Rs 4,842 crore from the BSE SME and NSE Emerge platforms. Despite the companies intending to raise only Rs 4,842 crore, applications worth a record Rs 2.8 lakh crore were submitted, indicating a robust interest in SME offerings. The new price control measures are expected to bring more stability and predictability to the SME IPO market, fostering confidence among both issuers and investors.

The regulatory scrutiny on SME IPOs is part of a broader effort to enhance transparency and fairness in the capital markets. The move to cap SME IPO prices reflects a proactive approach by the NSE to ensure a level playing field and discourage market irregularities. Investors and market participants are advised to stay informed about these regulatory changes to make sound investment decisions in the evolving IPO landscape. Stay tuned for further updates on the impact of the 90% cap on SME IPO prices in pre-open sessions.