The Securities and Exchange Board of India (SEBI) has issued a new advisory regarding investments in the securities of companies listed on the Small and Medium Enterprises (SME) segment of stock exchanges. This advisory comes in light of concerns about certain SME companies and their promoters engaging in practices that misrepresent their operational performance post-listing.
Since its inception in 2012, the SME platform has facilitated over ₹14,000 crores in fundraising, with around ₹6,000 crores raised in the fiscal year 2024 alone. However, SEBI has noted that some companies have been making misleading public announcements that create an overly positive perception of their operations. These announcements are often followed by corporate actions like bonus issues and stock splits, which can artificially inflate stock prices and encourage investor purchases. This situation allows promoters to sell their shares at inflated prices, raising alarm about potential manipulation in the market.
In response, SEBI has urged investors to exercise caution and to be vigilant against unverified information, particularly from social media. The regulator has also indicated that it is actively investigating several entities involved in these practices and has taken action against some of them, with details available on its website.
This advisory aims to protect investors and ensure a more transparent and fair investment environment within the SME sector.
