Bloodbath! SME IPO index slumps another 5% as Sebi’s warning bell makes retail bulls run for cover

As much as 41 witnessed a double-digit fall of up to 20%.

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Atmastco, Inflame Appliances, Srivasavi Adhesive Tapes, and Goyal Salt were the major laggards, shedding 16-20%. Atmastco made its debut on February 23 and its IPO received a strong response as it was subscribed more than 15 times. The stock had listed at a premium of over 18% to the issue price.

SEBI has also been monitoring price manipulation instances in IPOs and said that it may consider implementing disclosures as a starting step with respect to SME IPOs.

The SME segment has been flooded with public offers over the past one year, with many of them garnering overwhelming responses from both retail and high networth individuals.

"The booming market reflects high investor interest, leading some companies to trade above their fair value. This trend, where IPOs are oversubscribed by 500-1000 times and subsequently list at 100-300% premium suggests irrational valuation," said Kresha Gupta, founder of Chanakya Opportunities Fund.

While acknowledging that the SME market isn't immune to manipulation, it's feasible to manage such risks effectively through thoughtful regulation and oversight. This approach ensures that the market remains attractive and accessible while safeguarding investors against undue influence, Gupta said.

In the last one year, the S&P BSE SME IPO index has more than doubled in value, outperforming the benchmark Sensex by a significant margin.

While the high number of smaller companies tapping the market is positive as it allows them to unlock value and fuel growth, retail investors need to take cautious bets in an overheated market.

Most analysts are, therefore, recommending investors to evaluate the underlying potential of a company before betting their bucks.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)