SEBI Urges BSE, NSE To Tighten SME IPO Oversight Amid Concerns Over Due Diligence

The Securities and Exchange Board of India is actively urging the exchanges to tighten oversight on Small and Medium Enterprises IPOs or SME IPOs, as per sources associated with the issue.

NDTV Profit has also been told that the exchanges are meeting over 50 merchant bankers to deal with concerns about due diligence.

The market regulator is pushing the Bombay Stock Exchange and National Stock Exchange to tighten their due diligence on merchant bankers involved in SME IPOs. This is because SEBI observed weak enforcement in clearing some SME IPOs and raised concerns about unrealistic claims made by certain companies.

It was previously reported by NDTV Profit that SEBI has already initiated a probe into over 12 merchant banks to investigate lapses in their due diligence procedures for SME IPOs.

This move comes after SEBI Chairperson Madhabi Puri Buch warned about potential price manipulation and "irrational exuberance" in small and mid-cap stocks. In March, she described the surge in valuations as a bubble in certain segments of the market, urging investors to be cautious.

SEBI is also exploring regulatory changes to make the SME IPO listing process more robust. The upcoming consultation paper, discussed by SEBI’s whole-time member Ashwani Bhatia at the Financing 3.0 Summit, will propose adjustments aimed at strengthening compliance, including enhanced disclosures and audits.

These measures aim to safeguard investor interests while maintaining a robust listing process.