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Investors should be ‘watchful’ while investing in SME IPOs and not just get drawn towards short term returns, especially as many have been misled with wrongful advice, Sebi chairman Tuhin Kanta Pandey told Moneycontrol in an exclusive interaction on April 30.

“Our view is that disclosures are important. People should look at disclosures. So much of information is being made available to you (investors), then you should be watchful. Investors must also see how they are putting the money and diversifying, and not trying to put money only on the expectation… The returns may look temporarily very attractive in terms of capital gains, but they actually may not be true,” Tuhin Kanta Pandey said.

The 1987 batch IAS officer of the Odisha cadre who took charge as Sebi chair in March said the regulator is monitoring the developments in the SME IPO segment and will review the regulatory framework, if required.

: Review of MF's Total Expense Ratio not on the table right now: Sebi chairman

“Certain measures were taken to tighten the situation. We will be watchful as to how that pans out… We will be watchful. If we find that this requires a relook, we will revisit it in consultation with the industry,” he said.

Some of the companies in the SME IPO segment have been under regulatory lens for unusually high levels of subscription, followed by huge listing gains that have defied logic. The capital market watchdog has tightened the regulatory framework for SME IPOs even with stock exchanges playing a greater role in terms of regulating the segment. For instance, the SME IPO documents are vetted by the exchanges instead of the regulator that vets all the mainboard IPO draft documents.

The last two calendar years saw records fund raise in the SME segment. During 2023, as many as 181 SMEs launched their IPOs with the cumulative size pegged at Rs 4,664 crore, a new high only to be broken in 2024 when 240 SME IPOs raised a total of Rs 8,761 crore.

In the current calendar year till March, a little over Rs 2,370 crore has already been raised by 55 SME IPOs. Incidentally, 15 SME IPOs were launched in March even as there was not a single mainboard IPO during the month.

The new Sebi chairman also said many investors have been misled, especially by the finfluencer community, and the regulator will act tough against those who indulge in any kind of malpractices.

“Lot of people have been misled with wrongful advice. Also, because there are people who are perpetrating these kinds of advice for which we are going against them. (For instance), finfluencers who are not qualified to give such kind of advice on specific stocks,” said the Sebi chairman.

“(We) found cases where there was a tendency to pump and dump. We will come hard when we find such cases,” Tuhin Kanta said.

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