BENGALURU (Reuters) – The Securities and Exchange Board of India on Wednesday warned against investing in small and medium sized companies, saying some of them have presented an “unrealistic view of their operations.”
SEBI’s warning follows a series of complaints to the regulator that the separate listing platform for small companies is getting misused, even as IPO-bound Indian companies see massive oversubscription.
The regulator has barred at least five small companies from capital markets for misrepresentation of facts and misusing public money in the last four months.
The small and medium enterprises, or SME, platform was launched in 2012 to help emerging businesses raise funds. It has enabled the raising of over 140 billion rupees ($1.7 billion) in the past decade, the SEBI said.
However, some of those companies have been presenting an unrealistic view of their operations post listing by making public announcements that paint an overly positive picture, the regulator added.
The announcements are followed up with corporate actions including bonus issues, stock splits or preferential allotments.
The SEBI urged investors to be “careful and watchful” of such patterns.
($1 = 83.9340 Indian rupees)
(Reporting by Ashna Teresa Britto in Bengaluru; Editing by Nivedita Bhattacharjee)
