SEBI tells investors to be cautious on SME investing; warns about false picture, social media tips

SEBI issued an advisory regarding investment in securities of the companies listed on the SME segment on the exchanges.

Markets regulator Securities and Exchange Board of India (SEBI) has issued an advisory cautioning investors regarding SME investing, even as small company IPOs continue to see massive oversubscriptions.

SEBI has advised investors to be vary of the companies painting an unrealistic positive picture, and also not fall for social media tips or rumours.

The regulator said in a statement that post listing, some of the SME companies or their promoters have been resorting to certain means that project an unrealistic picture of their operations.

The regulator noted that in the recent past it has passed orders against such entities. It further highlighted the modus-operandi of these entities urging investors to be careful and watchful of these patterns.

“These announcements are typically followed up with various corporate actions such as bonus issues, stock splits, preferential allotments, etc. These actions create a positive sentiment amongst investors, which induces them into purchasing such stocks,” said the regulator.

The advisory, while not mentioning IPO investments, comes in the wake of massive oversubscriptions seen of late. One such company that made headlines this week itself is Rs 12 crore Resourceful Automobile, which got oversubscribed 419 times and attracting bid for Rs 4,800 crore.

The Small and Medium Enterprises (SME) platform of the stock exchanges was launched in 2012 as an alternative source for raising funds for emerging businesses.

Since its inception, the number of SME issues and investor participation has steadily increased. Over the past decade, more than Rs 14,000 crore has been raised through the platform, with approximately Rs 6,000 crore raised during the fiscal year 2024.