The Securities and Exchange Board of India (SEBI) has issued an advisory to investors, cautioning them against investing in certain Small and Medium Enterprises (SMEs) listed on the SME segment of stock exchanges. In a statement, SEBI noted that some SME companies, after listing, tend to project an unrealistic picture of their operations through public announcements.
These announcements are often followed by corporate actions such as bonus issues, stock splits, and preferential allotments, which can induce investors to purchase these securities. Simultaneously, this provides an opportunity for promoters to offload their holdings at elevated prices. Highlighting the modus operandi of these entities, SEBI has stated that it has passed orders against such companies, which are available on SEBI’s website. The statement urges investors to be cautious and vigilant, advising them not to rely on unverified social media posts or invest based on tips and rumours.