Fraud Concerns Raise Red Flags for India’s Booming Tiny IPOs

A string of accounting frauds unearthed by India’s securities regulator this month poses another risk to the blistering rally in shares of tiny businesses.

Varanium Cloud Ltd. and Add-Shop E-Retail Ltd. — both listed on the small and medium enterprises platform — were found to have manipulated their financial statements to fuel gains in their shares, according to initial orders issued by the Securities and Exchange Board of India. The authorities have banned both companies and their founders from dealing in the country’s capital market.

The crackdown comes after the regulator issued warnings earlier this year of price manipulation ...