NSE imposes cap on price of SME debutants amid concerns of manipulation

Amidst concerns of manipulation, the National Stock Exchange (NSE) has said the opening price on its small and medium enterprises (SME) platform for a stock can be only 90 per cent higher than the issue price. 

“To standardise the opening price discovery/ equilibrium price across exchanges during special pre-open session for initial public offer (IPO) for the SME platform, it has been decided to put an overall capping up to 90 per cent over the Issue price for SME IPOs,” said NSE in a circular.

The change will be made effective from Thursday onwards. 

The exchange has clarified that such price control has been imposed only on SME IPOs and not on those getting listed on the mainboard.

The concerns in SME stocks stem from the irrational growth and return seen in the prices. 

The exchange’s decision follows an astronomical rise in the price of SMEs on the listing day, some as high as 200 per cent.  The market regulator has also taken action on certain entities engaged in either inflating the subscription numbers or senior management of several SMEs which allegedly engaged in fraudulent practices such as manipulation in the financial statements.  

IPOs of SMEs are approved by the stock exchanges and do not undergo the strict scrutiny of the Securities and Exchange Board of India (Sebi). Further, the scrip can migrate to the mainboard from SME platforms on meeting certain criteria. 

BSE and NSE both have separate platforms for the SMEs called BSE SME and NSE Emerge, respectively. 

Earlier this year, both the exchanges imposed stricter norms for migration and surveillance. 

In a major step to curb manipulation, the markets regulator last year extended the Short Term Additional Surveillance Measure (ST-ASM) framework to the small and medium enterprises (SME) stocks.

Earlier the framework was  implemented only on the stocks listed on the mainboard.