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SEBI Chief Says Market Regulator Has No Role in IPO Pricing Of New-Age Tech Firms

Sebi chairperson Madhabi Puri Buch on Tuesday said that the capital markets regulator has no business to suggest pricing of the initial share sale of new-age technology companies. 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 Rs 100 but wishes to come to the market at Rs 450…we expect you to disclose to the investor what accounts for the difference between Rs 100 and Rs 450. What has changed? It may be internal or external metrics. Essentially Sebi expects the disclosures pertaining to these aspects,” she said.

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.

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. The share price of payment platform Paytm collapsed to a third of the IPO issue price within a few weeks of listing.

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

Meanwhile, she also said Sebi is analysing data and information on retail participation in the futures and options segment, which may lead to more disclosures to be made available to them.

“Sebi will continue to be consultative and democratic in its approach while making regulations and be driven only by data,” she said.

As part of a reorganisation exercise, Sebi has appointed one to three officials in every department whose key resource area is to come out with ideas on regulation that 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.

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