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SME IPO: Market regulator SEBI on Tuesday proposed to increase the minimum investment limit for applying for SME (Small and Medium Enterprises) IPO to Rs 4 lakh. The aim is to ensure that only investors with sufficient risk-taking and investment capacity can apply. This step has been taken after the rapid growth in SME issues. There has been a good participation of investors in these issues.
Investor participation also increased significantly
With the increase in SME issues, investor participation in such offerings has also increased significantly. The allotted investor-applicant ratio was four times in FY 2021-22, it has increased to 46 times in FY 2022-23 and 245 times in FY 2023-24. That is, earlier one in four people used to get shares in SME IPO, but now one in 245 gets it.
Protecting small retail investors
SEBI said in its consultation paper, "Retail investors' participation in SME IPOs has increased in the last few years. SME IPOs are risky and there is a risk of them getting trapped if the sentiment changes after listing. Given this, it is proposed to increase the minimum application size in SME IPOs from Rs 1 lakh to Rs 2 lakh to protect the interests of small retail investors.
This will ensure that only investors with the risk-taking ability and knowledge apply for SME IPOs.
Confidence will increase regarding the SME segment.
The higher investment limit will reduce the participation of small investors and attract investors with risk-taking capacity. This will increase the confidence in the SME segment. Another proposal suggests increasing the investment limit from Rs 1 lakh to Rs 4 lakh per application.
The Securities and Exchange Board of India (SEBI) has asked people to give suggestions in this regard by December 4.
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