Securities and Exchange Board of India chief Tuhin Kanta Pandey has called for investors to remain ‘watchful’ when it came to SME IPOs — noting that returns ‘may not be true’ in some cases. He also urged investors to look at disclosures — noting that a vast amount of information was made available to people but flew under the radar.
“So much of information is being made available to you (investors), then you should be watchful. Investors must also see how they are putting the money and diversifying, and not trying to put money only on the expectation… The returns may look temporarily very attractive in terms of capital gains, but they actually may not be true,” Pandey told Moneycontrol.
The remarks come mere weeks after the market regulator tightened norms for small and medium enterprise IPOs — introducing a profitability requirement and capping a 20% limit on offer-for-sale. The reforms aimed to provide SMEs having a sound track record with a chance to raise funds while also protecting investor interests.
The change came amid a sharp rise in SME IPO activity over the past two years and increased participation from retail investors. According to primedatabase.com, around 240 SMEs raised more than Rs 8,700 crore in 2024 alone. The number is nearly double the Rs 4,686 crore raised in 2023.
The National Stock Exchange also introduced several measures (coming into effect from May 1) last week to tighten mainboard migration rules for SMEs. Companies will now be required to have Rs 10 crore paid-up capital and at least Rs 100 crore in market capitalisation. It also mandated that companies should be listed on its SME platform for at least 3 years and called for there to be at least 500 public shareholders on the date of application. Promoter and promoter group holding is required to be at least 20% at the time of making application to shift.
(With inputs from agencies)