NSE imposes 90% price control cap on opening price of SME IPOs

The National Stock Exchange (NSE) on Thursday announced that it will impose a price control cap of 90% on the issue price of SME IPOs during the pre-opening session.

“To standardize 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% over the Issue price for SME IPOs,” NSE said in a circular.

The circular will come in force with immediate effect i.e. July 4, 2024.

The price control cap of 90% shall be applicable only to the SME segment and not for Mainboard IPOs, Relisted Securities or Public Debt, it added.

For instance, on July 2, Divine Power Energy was listed at 288% premium to the issue price. Shivalic Power Control got listed at a 211% premium on the NSE SME on July 1. Many other recent SME IPO listings saw exorbitant gains on the first day of trading.

The concerns in the SME segment were also raised by SEBI chairperson Madhabi Puri Buch earlier this year as she noticed “signs of manipulation in the SME segment”.

Around 120 companies have been listed in the SME segment so far in 2024 on both the stock exchanges. Among these, about 35 companies saw listing day gains in the range of 99% - 415%.

This led a sharp rally of 112% year-to-date (YTD) on the BSE SME IPO index and hit a record high of 99,061.33 on Thursday.