NSE caps SME IPO listing gains at 90 per cent over issue price

NSE caps SME IPO listing gains at 90 per cent over issue price

This action, according to NSE, has been taken to standardise the opening price discovery or equilibrium price across exchanges during the special pre-open session.

NEW DELHI: In its attempt to curb volatility and malpractice, the National Stock Exchange (NSE) has placed an overall capping of 90% over the issue price for small and medium enterprises (SME) IPOs during the special pre-open session. This means the listing gain of a debutant stock will not exceed the 90% mark of the issue price.

This action, according to NSE, has been taken to standardise the opening price discovery or equilibrium price across exchanges during the special pre-open session. The change, which is not applicable to mainboard IPOs, has been implemented with immediate effect. “The price control cap of 90 per cent shall be applicable only to the SME segment and not for Mainboard IPOs/Relisted Securities/Public Debt,” NSE said in its circular issued on Thursday.

The curb on listing gain comes after India’s capital market regulator Sebi previously said that it has found patterns of manipulation in the IPOs of small and medium enterprises. It has also warned about a froth building up in this space.

Manish Chowdhury, Head of Research at StoxBox said that the capping on SME price opening would bring some sanity to the frenzy in the SME IPO segment which has been driving all classes of investors.

“Considering the small size of the companies, limited information in public domain and higher risks associated with these issues, our sense is that the step of capping is a step in the right direction and would protect investors from chasing these IPOs for listing gains,” he added. Supported by a strong bull run in the secondary market, India’s IPO market has seen several stocks debuting with exorbitant listing gains.

For instance, Divine Power Energy entered the bourses on Tuesday with a listing gain on over 287% premium on the NSE Emerge platform. Kay Cee Energy recently debuted with a listing gain 343% over the IPO price. So far this year, about 100 SME IPOs have raised little Rs 3,100 crore. In 2023, a total of 182 had raised Rs 4,686 crore. Amit Goel, co-founder and chief global strategist at Pace 360 said the cap can help moderate price swings. He added that the investors who aim to buy IPO shares and then quickly resell them at a high opening price might find it more challenging with the new cap.

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The New Indian Express
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