SEBI Chairperson Madhabi Puri Buch Says SEBI Has No Business in Suggesting Start-up IPO Prices

Moneylife Digital Team 13 September 2022

Investor Interest

Madhabi Puri Buch, chairperson, Securities and Exchange Board of India (SEBI) said a company is free to ask for a higher price when launching an initial public offering (IPO) and that the capital markets regulator has no business to suggest pricing of the initial share sale.

"A lot has been said about the pricing of IPOs of tech companies at what price you choose to do the IPO is your business, we have no business to suggest otherwise," Ms Buch said while addressing the annual capital markets summit organised by industry lobby FICCI (Federation of Indian Chambers of Commerce and Industry) here.

She, however, said that there needs to be more disclosures by companies on how valuations have changed between a pre- IPO placement and the price which is being asked for in the issue.

It can be noted that there have been concerns about investors, especially the unsuspecting retail ones, being taken for a ride due to high valuations sought by new-age tech companies. Last year, Paytm share price had collapsed to a third of the IPO issue price within a few weeks of listing.

Ms Buch explained through an example of a company selling shares to investors at Rs100 and then asking for Rs450 in an IPO within a few months. She said a company is free to ask for a higher price, but needs to disclose what happened in the intervening period which justifies the massive change in the valuation.

When asked about some recent incidents and what can be done to avoid such experiences, Ms Buch parried the question saying investment bankers ought to answer that.

Still, SEBI is analysing data and information on retail participation in the futures & options (F&O) segment, which may lead to more disclosures to be made available to them, she said. "SEBI will continue to be consultative and democratic in its approach while making regulations and be driven only by data," Ms Buch said.

As part of a reorganisation exercise, SEBI has appointed officials in every department whose key resource area is to come out with ideas on regulation which will make the industry 'celebrate', she said. The regulator has also sought changes in the SEBI Act which will help it test potential ideas in a regulatory sandbox, she said.

Comments

User

angelo.extross

3 years ago

Is she trying to pass on the buck to investment bankers?
Not sufficient for a company to disclose what happened in the intervening period to justify the massive change in value. That MUST be followed /concluded by by SEBI by agreeing/accepting the disclosure or otherwise.

saharaaj

3 years ago

good way to reign in corny fellows in UNICORN space