Amid growing scrutiny over erratic IPO pricing and weak post-listing performance of several recent public issues, Securities and Exchange Board of India (SEBI) Chairperson Tuhin Kanta Pandey on Wednesday pushed back against calls for regulatory intervention in price discovery, saying listing-day outcomes cannot be generalised or used as a proxy for a company’s long-term performance.
“We do have data, but one day’s listing performance cannot be generalised or taken as a representation of how a company will perform over its entire life cycle,” he said.
“Who makes the listing well that particular day — that is one day in the history of the company in the whole journey of the company,” Pandey said while adding that investors are not obliged to participate in every public issue. In his words, “…People can take a call whether to subscribe or not. It is not that everyone has to do it.”
Pandey said concerns around IPO valuations are best addressed through better information flow rather than regulatory intervention. “We follow a disclosure-based regime and we do not interfere in pricing...People can take a call whether to subscribe or not. It is not that everyone has to do it,” he said.
At its latest board meeting, SEBI cleared a technology-enabled framework to automatically mark pledged pre-issue shares as locked-in, addressing operational challenges faced by issuers ahead of listings. The regulator also approved changes to how IPO disclosures are presented, requiring a draft abridged prospectus to be made available at the DRHP stage.
As part of the approved changes, the abridged prospectus will now be available even at the draft stage and will be accessible through QR codes, allowing investors to quickly assess key information without navigating voluminous documents.
According to SEBI, the abridged document will also highlight pre-IPO share transactions, including prices at which shares were issued in the year preceding the IPO and the volume-weighted average cost of equity over the last three years.
SEBI also approved amendments to the ICDR Regulations allowing depositories to directly handle the lock-in of pledged pre-issue shares. The move addresses a long-standing issue where pledged shares could not be marked as locked-in, creating compliance risks for issuers.
Companies coming up with IPOs will be required to amend their Articles of Association to ensure that pledged shares remain locked-in for the prescribed period, even upon invocation or release of the pledge.
Securities and Exchange Board of India on Wednesday in its board meeting, approved a set of amendments to IPO regulations aimed at easing compliance bottlenecks and improving investor access to key information, while reiterating that it will not intervene in price discovery. Pandey iterated that the measures are intended to improve transparency and execution without altering the regulator’s core philosophy on pricing.
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