SEBI Has No Business To Suggest IPO Price To New-Age Tech Companies: Chairperson

Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch on Tuesday (September 13) said that new-age tech companies are free to price their shares for initial public offering (IPO) at what they deem ‘appropriate’.

“A lot has been said about the pricing of the IPOs of the new-tech companies. What is SEBI’s view…At what price you choose to do your IPO is your business, we have no business to suggest otherwise,” said Buch.

“The days of CCI (Competition Commission of India) are long gone. The Parliament has mandated us that we should have no view on the pricing of issues and you are free to price the issue at whatever price you consider appropriate,” she added.

Buch made the comments while addressing the 19th annual Capital Markets Summit organised by industry body Federation of Indian Chambers of Commerce & Industry (FICCI) in Mumbai. 

Buch said that SEBI has no say in matters regarding a firm seeking a higher issue price compared to its valuations during pre-IPO placement. 

However, she called for proper disclosures related to equity value and asked the companies to justify massive changes in valuation.

“If a company going for an IPO has placed its equity with a private party at INR 100 three or six months ago and, now, it wishes to come to the market at INR 450. We have nothing to say in the matter,” Buch explained. 

“However, when you disclose, we expect you to disclose to the investors what accounts for the difference between INR 100 and INR 450. What has changed? It could be your internal or external metrics but disclose it to the investor…” the chairperson added.

Buch also told the gathering that the market watchdog will be led by data and continue to be consultative and democratic in its approach. “Every policy is contingent on data support. Our commitment to industry is that we will eschew dogma and embrace data. SEBI will continue to be consultative and democratic in its approach while making regulations and be driven only by data.” 

The SEBI chairperson also noted that the markets regulator has sought changes in the SEBI Act to enable it to test potential ideas in a regulatory sandbox. 

A sandbox is a testing environment that allows for new products to be run securely and safely.

In addition, Buch also said that SEBI has multiple officials in every department to come up with regulatory ideas that will make the industry ‘celebrate’.

Sharp Fall In Prices Of New-Age Tech Stocks

The comments come months after reports said that SEBI was mulling asking IPO-bound companies to disclose the logic behind their IPO pricing if it is higher than the rate at which placement of the shares was done. 

In Tuesday’s address, Buch cleared the air and said that SEBI would not occupy itself with such matters, but directed firms to put due focus on such disclosures. 

The debate on the issue gathered steam after the sharp fall in shares prices of new-age tech companies post their public listing over the last year or so. Shares of Paytm, which listed at INR 1,961.05 in November last year, are currently trading 62% lower at INR 735.30.

Foodtech giant Zomato has also tanked more than 61% on the BSE since hitting an all-time high of INR 169.10 around its listing last year. Shares of beauty ecommerce platform Nykaa have also nearly halved to INR 1,361.10 from its record high of INR 2,574 in November last year. 

The shoddy performance of the new-age tech stocks raised many questions, with many pointing out that these stocks were wildly overvalued and the company took retail investors for a ride. 

Despite this, SEBI continues to be pragmatic. Attesting to that, Buch said that transparency is the leading foundation to ensure trust among the investors to ensure growth and development of a business.

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