NSE Imposes Price Control Cap Of 90% On SME IPOs

New Delhi: National Stock Exchange (NSE) on Thursday said that it will impose a price control cap of 90% on SME IPOs on the NSE Emerge (SME) Platform of the Exchange.

"To standardize the opening price discovery/ equilibrium price across exchanges during special pre-open session for initial public offer (IPO) for the SME platform, it has been decided to put an overall capping up to 90% over the Issue price for SME IPOs," NSE said in a circular. 

The price control cap of 90% shall be applicable only to the SME segment and not for Mainboard IPOs/Relisted Securities/Public Debt. The circular will come in force with immediate effect i.e. 4th July 2024, the regulator added.

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360 said that the new rule can potentially reduce volatility and speculation in the opening price of SME stocks. Previously, there was no cap, and some SME IPOs would see their opening price surge significantly above the issue price. This could be due to factors like hype or short supply of shares. The cap can help moderate such price swings, he added.

"Moreover, Investors who aim to buy IPO shares and then quickly resell them at a high opening price might find it more challenging with the new cap. Because the opening price is now restricted to 90% above the issue price, the potential for immediate high profits is reduced. Overall, the new rule is likely to have a moderating effect on the opening price of SME IPOs," Goel said.