look news india
SEBI warns on IPO oversubscribed: Nowadays people have become eager to invest in IPOs. Market regulator SEBI has advised investors to be cautious about investing in SME companies. SEBI has said that do not invest by being influenced by social media and advice of others. After listing, the picture of many SME companies is not presented properly. Measures like bonus, rights issue and stock split are often taken to maintain a positive image.
Such companies resort to illegal methods to increase share prices in the market and then exit. SEBI asked investors not to invest their money based on social media posts, tips and rumors.
SEBI has said that the promoters of SME companies themselves sometimes charge high prices by showing a good image. There was a lot of talk about the massive oversubscription in a small issue of a company. SEBI has detected cases of fund diversion, fake financial accounts, related party deals, incorrect sales and purchase data in many companies.
Auditors have advised to exercise more caution
The market regulator has recently passed orders against companies such as Veranium Clouds, Add One Retail and Debock Industries. SEBI has also advised auditors of SME companies to be more cautious in audits. About Rs. 14,000 crore was raised through SMEs in a decade, of which Rs. 6,000 crore was raised in FY24.
This is how companies are misleading investors
SEBI has found that after listing, some SMEs or their promoters are using methods to present an unrealistic picture of their performance. SEBI said that these announcements are usually followed by various corporate actions such as bonus issue, stock split and preferential allotment. This creates a positive sentiment towards the company in the minds of investors, which motivates them to buy the stock of that company. Apart from this, it also provides an easy opportunity to the promoters to sell their stake in such companies at a higher price.
SEBI has recently passed orders against such entities. Earlier this week, SEBI passed an order against an SME entity called Debok Industries and three related entities, including the promoters. The company was listed on the SME platform of NSE in June 2018 and moved to the main board in March 2022.
Such craze for IPO has rarely been seen before for the issue of a well-resourced automobile company. The company runs two bike showrooms in Delhi and employs only 8 employees. To raise money from the market, the company launched its IPO on August 22, in which investors were investing till August 26. But there is a race to raise money in these IPOs. The company received bids worth Rs. 4768.88 crore. Out of this, bids worth Rs. 2825.11 crore are included in the retail category. Bids worth Rs. 1796.85 crore are included in the other category.