Explained: NSE's 90% cap on listing price for SME IPOs. What it means

The National Stock Exchange of India (NSE) on Thursday, July 4, issued a circular that imposes a cap of 90% on the listing price of shares under the small and midsize enterprises (SME) segment, as compared to the IPO price.

The price-control cap, however, would be applicable only for the SME segment, and "not for mainboard IPOs", the stock exchange clarified. "The circular will come in force with immediate effect i.e. 4th July 2024," it further noted.

90% cap on SME IPOs: What does it mean?

The NSE has imposed an upper ceiling on the opening price of shares on its NSE Emerge platform, which is used for SME listings.

To cite an example, consider an SME IPO that was launched with a price band of ₹90-100 per share. In such a scenario, the shares will open at not more than ₹190 per scrip, which will mark a premium of 90% against the upper end of the IPO price band of ₹100.

According to analysts, the NSE circular is likely aimed at checking froth – a market condition where a company's price begins sharply exceeding its intrinsic value.

Three bumper SME IPO listings this week

Nephro Care listing subject to NSE cap

The NSE circular will be applicable on the listing of Nephro Care, whose IPO received an unprecedented response. The company's shares are scheduled to list on the NSE Emerge platform on Friday, July 5.

The public issue, which was open for subscription on three working days ending July 2, was booked 716 times.

Following the strong subscription, the grey market was reportedly bullish on Nephro Care's Dalal Street debut. The grey market premium (GMP) on the shares crossed ₹180, as per the details shared by investorgain.com on July 3. This indicated that the shares could be listed at around ₹270, which would have marked a 300% premium against the upper end of the IPO price band of ₹90.

However, with the NSE circular on SME IPOs coming into effect, the listing price will be capped at a maximum of ₹171 per share, which is 90% higher as compared to the upper IPO price of ₹90.