Sebi against exuberance, price manipulations in SME listings; board to discuss it soon: WTM Bhatia

Mumbai, Dec 17(PTI) Capital markets regulator Sebi wants to prevent exuberance, price manipulations and fraudulent trading practices on the Small and Medium Enterprises exchange, a senior official said on Tuesday.

Addressing the India SME Banking Summit here, Whole Time Member Ashwani Bhatia said the regulator’s board will be taking up the issue at its forthcoming meeting.

As per media reports, the Sebi board’s meet on Wednesday will be discussing issues related to SME board.

“We are cognisant of the fact that we need to prevent exuberance, price manipulation or fraudulent trading practices,” Bhatia said, addressing a seminar on Tuesday.

He listed out a slew of concerns which Sebi has observed when it comes to SME listings, and added that it had come out with consultation paper to address same aspects.

“‘We shall be discussing this in the forthcoming Sebi board meeting which will happen shortly,” Bhatia said.

In the last two years, Sebi has upped its oversight of SME board, Bhatia said, pointing to revelation of some worrisome practices in the market.

These include companies misrepresenting facts which makes it difficult for retail investors to assess the “true worth and viability” of a business, and which lead to artificial shortages and inflated valuations of scrips, and, also tendencies among promoters to pare stakes after an initial public offering.

“If you sell the stake of your own company, how would you expect investors to invest in your company?” Bhatia asked, pointing at some promoter behaviour.

He said SMEs have to look at governance as a focus area, and added that if an entity has no issues on this front, there is no dearth of capital.

Bhatia said he is “sometimes shocked” by the investor interest in SME IPOs, with some of the issuances subscribed by over 1,000 times.

It is not easy for an SME, he said, noting that meeting regulatory standards and post-listing governance make it a complex landscape for such entities.

Bhatia said SMEs flag disclosure and compliance as challenging aspects when it comes to listing, but countered such notions saying he disagrees because more disclosures and documentation is required while availing a bank loan.

He said SMEs have raised ₹6,447 crore from 171 listings in 2024 till now, and the overall market capitalization of all the SME scrips is ₹2.25 lakh crore.