Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch on Tuesday said the regulator does not have any role in pricing of initial public offerings or IPOs, emphasizing the need for a thorough disclosure-based regime for better functioning of capital markets.
Addressing FICCI’s capital markets event, Buch said “People are free to do what they want to do but they should make disclosures", she said.
In 2021, several new age technology companies came up with their initial public offerings. However, most companies are currently trading at lower prices despite having inflated valuations. This led to heavy destruction of investors’ wealth and also gave rise to a whole debate on the pricing of the issues and Sebi’s role in it.
Buch said “A lot has been said on the pricing of the IPOs of new age technology companies. Our view is simple at what price you chose to do your IPO is your business, we have no business to suggest otherwise. The days of the CCI (Controller of Capital Issue) are long gone. Parliament has mandated Sebi that we should have no view on the pricing of issues. You are free to price the issue at whatever price you consider appropriate. The specific procedure however, is directed by Sebi which includes the way IPO documents are filed or the way that they are given in the public domain.“
“If a company is coming to IPO three-six months ago and has placed its equity with some party assuming a private party at ₹100 but wishes to come to the market at ₹450. We expect you to disclose to the investor what accounts for the difference between ₹100 and ₹450. What has changed ? It may be internal or external metrics . Essentially Sebi expects the disclosures pertaining to these aspects," she said.
Sebi has been relying on data and technology which have proven to be of great help to the regulator in many aspects. “In today’s context, some regulations may be completely inappropriate. Going forward, for us, what is important is first principles and data. We invite data. Every single policy that comes out today is back-tested by data. There is not now a single piece of paper that moves within Sebi that is not backed by data. We will eschew dogma and we will embrace data," Buch said.
She also pointed out that since the market dynamics are changing at an ever-increasing pace, technology is the ‘magic bullet’ that will help the regulator in solving a lot of financial misdoings like insider trading, front running, market manipulation etc that are common in the business ecosystem.
