SEBI Warns Investors Of Some SMEs' Misleading Trading Practices

The Securities And Exchanges Board of India on Wednesday issued an advisory saying that many small and medium enterprises are luring investors using positive sentiments followed up by bonus issues and stock splits.

The markets regulator also noted that post listing, many SME companies "resort to certain means of projecting an unrealistic picture of operations".

The investment advisory comes on the back of India raising over Rs 14,000 crore in the SEBI SME platform over the past decade and around Rs 6,000 crore in fiscal 2024.

Some SME promoters use this opportunity to offload holdings at elevated prices, it said, urging investors to be watchful of such patterns and exercise caution. Investors are also advised to not rely on unverified social media posts and rumours.

According to exchange data, many SME companies listed this year were trading below their listing day price, despite making multifold profits on their debut.

On July 4, the National Stock Exchange imposed a 90% cap on the issue price of SME initial public offerings during listing to prevent large price swings. This was implemented to ensure that the opening price discovery was consistent across exchanges during the special pre-open session.

"We do see patterns of price manipulation and certain patterns. The market has advised us on what to do to identify such cases and deal with them," Securities and Exchange Board of India's Chairperson, Madhabi Puri Buch, had said earlier.