NSE Imposes Price Control Cap on SME IPOs, Sets 90% Limit for Shares in Pre-Open Session

The National Stock Exchange (NSE) has implemented a price control cap of 90% on the issue price for Small and Medium Enterprise (SME) IPOs. A circular was released on July 4, 2024, and came into effect immediately. The 90% price control cap is specific to the SME segment and does not apply to mainline IPOs, re-listed securities, or public debt.
NSE Imposes Price Control Cap on SME IPOs

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The NSE took action in response to notable gains in first-day trading that were seen in many SME IPOs. In the SME category of 2024, about 120 businesses were listed. Particularly on the day of their listing, the shares of about 35 of these companies experienced a notable jump, with values ranging from around 99% to 415%.

The NSE’s circular aims to standardize the opening price discovery process during the special pre-open session for SME IPOs. The NSE aims to prevent excessive volatility and guarantee a more regulated price discovery process by capping the listing price at a maximum of 90% above the issue price.

For investors, this new cap means that while a new stock on the NSE Emerge platform can still list at a premium, the maximum premium is limited to 90% over its issue price. The price may still change after IPO listing depending on market conditions, but the initial listing price will now have a more limited range to reduce excessive volatility.

This regulatory change comes after 2023, a year that broke records for SME IPO investments. During that year, 176 companies collectively raised Rs 4,842 crore from the BSE SME and NSE Emerge platforms, attracting a record Rs 2.8 lakh crore worth of applications, far exceeding their initial fundraising targets.

The NSE’s move is an indication of its commitment to maintaining market stability and safeguarding investors’ interests in the expanding SME sector.

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