NSE Capped SME IPOs’ Pre-Open Price Spike at 90%

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The National Stock Exchange (NSE) came up with a new rule on Thursday 4 July 2024, for the upcoming SME IPOs. From now onwards, the maximum price of any SME IPO in the pre-open session of the initial public offering can be up to 90%. This rule applies to all the SMEs, which are seeking listing on the NSE Emerge platform and this does not apply to mainboard IPOs. This rule will be in force with immediate effect to standardize the opening price discovery. 

Rationale Behind the New Rule

As per experts and analysts, this capping on the pre-open price of the SME IPOs can help keep an equilibrium in the SME IPO segment, which gets highly volatile in the pre-open sessions. This would also help all classes of investors as SME stocks are attracting retail investors as well in recent times. 

Since SMEs are small companies whose financial information and business performance-related data are not easily available, like a large-cap company, this capping of the pre-open price can protect the interest of the investors and reduce the chances of price manipulation. With this capping on the pre-open price of the SME IPOs, the investors who were investing in this segment for listing gains can be discouraged and in turn, it will bring sanity to the segment and overall market. With the 90% cap rule, the excessive speculation that happens in the SME IPO segment can also be brought down, especially in the pre-open session. 

Recent SME IPOs with Exponential Debut

On 2 July 2024, Divine Power Energy made a stunning debut on the NSE Emerge with a listing premium of 287%. The scrip opened at ₹ 155 whose actual IPO price was ₹ 40 per share. Then the price further jumped to a new intraday high of ₹ 162.75 within a few minutes of trading. Similarly, Kay Cee Energy is listed with a 343% premium over its IPO price. 

These instances of SME IPOs being listed at exponential premiums made the segment prone to higher speculation and volatility. This is why NSE has come up with the 90% capping rule on the pre-open price. Once the SME is listed, then the price can rise at its own pace, however, not in the pore-open session. 

Overall SME IPO Segment Performance

Until 13 June 2024, SME IPOs raised around ₹ 3095 crore from 100 issues since the beginning of FY25. In FY24, there were around a total of 182 SME IPOs, which garnered around ₹ 4686 crores. This indicates the growing popularity of SME IPOs and retail investment has picked up in this segment which is another prime factor behind this highest-ever fundraising from SME IPO segment in this year.

Upcoming SME IPOs This Week 

  1. Ganesh Green Bharat Limited IPO: This SME IPO will open on 5 June 2024 and run until 9 July 2024. This is a fresh issue IPO of 6591000 equity shares. The issue price of IPO would range between ₹ 181 to ₹ 90 per share and the total issue size is around ₹ 125.23 crores. 
  2. Effwa Infra & Research Limited IPO: The next SME Ipo of this week is Effwa Infra which is an issue of around ₹ 51.27 crore with a price bank of ₹ 78 to ₹ 82 per share. This IPO is open from 5 July to 9 July 2024. 
  3. Sahaj Solar Limited IPO: This is going to launch on 11 July and run until 15 July 2024. This SME IPO is a fresh issue as well of around 2834004 equity shares with a price band of ₹ 171 to ₹ 180 for each share. The total issue size is around ₹ 52.56 crores. 

Wrapping up

Investors waiting for the upcoming SME IPOs to invest must keep in mind the new rule of 90% cap on the pre-opening price of SME stocks. With this new rule in place, the growth in the SME segment can be expected to be more justified and it will ensure the protection of investors’ interests. 

Source: https://www.cnbctv18.com https://ganeshgreen.com https://sahajsolar.com


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