NSE sets cap on SME IPOs, big blow to investors earning bumper profits!

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Over the past few years, the stock market has seen a boom in initial public offerings (IPOs). From the mainboard to the SME category, there are many such IPOs that have made investors rich on the day of listing. Now National Stock Exchange has taken a big decision regarding SME IPO. The decision may come as a blow to investors who want to double or triple their earnings by betting on SME IPOs.

What is the decision on SME IPO?

SME IPO listing price on National Stock Exchange has been fixed. This limit is 90 percent. If you understand in simple language, now companies will not be listed at more than 90 percent of the IPO issue price. Earlier there was no limit on the listing price. This decision of the stock exchange has come into effect from July 4, 2024. Please note that this order will not apply to Mainboard IPO.

IPOs offer bumper profits

The stock exchange’s move comes amid concerns over how SMEs are giving multibagger returns on the day of the IPO listing. Recently on Monday, Shivalik Power was listed on the NSE SME IPO platform at a huge premium of 211%. An analysis of SME IPOs in the first half of 2024 shows that 43 out of 110 issues have at least doubled investors’ assets and returned up to 1500% in their offer price.

SEBI Chairman warned

Madhabi Puri Buch, chairperson of market regulator SEBI, recently warned of manipulation in SME IPOs. Some issuers and bankers were abusing the framework provided for SME listing. He said the regulator was gathering evidence following complaints of price manipulation in the sector. Let us tell you that the regulator has recently barred three SME companies from the capital market on charges of misappropriation of funds raised.

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