At a time when shares of most of the start-ups and digital majors that listed on the bourses last year are trading well below their respective issue prices, the capital markets regulator Securities and Exchange Board of India (SEBI) has said that it does not have any say in the pricing of the initial public offers (IPOs) but can only insist on full disclosures.
Speaking at a capital markets conference organised by industry body FICCI, SEBI chairperson Madhabi Puri Buch said that companies are free to choose the price they deem fit.
“A lot has been said about the pricing of IPOs of the new tech companies. Our view is simple. At what price you choose to do your IPO is your business. We have no business to suggest the price,” said Buch.
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“The days of CCI are long gone. The parliament has mandated us that we should have no view on the pricing of issues. You are free to price the issue at whatever price you consider appropriate,” she added.
More importantly, however, she said that there should be full disclosures especially when there is a huge jump in the pricing of the IPO when compared to the recent placement of shares.
“If a company has three or six months ago placed its equity… at ₹100 and now wishes to come to the market at ₹450. No problem. But when you disclose… disclose to the investor what accounts for the difference between ₹100 and ₹450. What has changed,” said Buch.
If nothing has changed, then disclose that nothing has changed, she added.
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This assumes significance as last year when a record amount was mobilised through public issues, marquee names from the start-up world including, Paytm, Zomato, Nykaa and Policybazaar came to the stock markets to list.
However, investors burnt their fingers in most of the offerings as the current share price of most of these start-ups are significantly lower than their issue price.
For instance, the issue price of Paytm was ₹2,150 and the shares are currently trading at ₹739. Similarly, Policybazaar is currently at ₹543, as compared to its issue price of ₹980.