Retail investors shouldn’t rush into IPOs, wait for prices to stabilise, says SEBI chief Buch

SEBI Chairperson Madhabi Puri Buch (File pic)

The price discovery mechanism of initial public offerings (IPOs) is “imperfect” and retail investors investing for the long-term should wait for prices to stabilise, Securities and Exchange Board of India chairperson Madabhi Puri Buch has said.

Speaking at AIBI Annual Convention 2023-24 on January 19, Buch also expressed concern over malpractices such as mule accounts, inflating of IPO application numbers to give an impression of high subscription, and applying in a manner that the application gets rejected. SEBI was working to resolve these issues, she said.

“The listings in last few years have been a mixed bag and therefore the acknowledgement that IPO pricing is at best a judgement of various players and that it can go either way, and therefore retail investors can wait until price discovery is more stable,” Buch said.

For retail investors, and not retail traders who flip within the first few weeks, there is no hurry or impact cost, she said.

Also read: Sebi probing mule accounts, faulty IPO applications, 3 cases under scanner, says Buch

On the ageing of public issues, Buch said that SEBI recognised the time value of money, any delay on the part of the regulator would have serious consequences for issuers. “Internally, we have taken steps to ensure that the ageing of applications, especially with IPOs, should come down,” Buch said.

The number of applications pending with SEBI for around six months has come down to four as of December 2023 from 10 in September 2022.

Also Read: 7 tips for 2024: How to maximise gains from IPO listings

This year, so far, over 27 companies received SEBI approval to raise a combined amount of Rs 28,500 crore. Another 36 companies were awaiting approval to raise a total of Rs 40,500 crore.

In 2023, 57 firms raised Rs 49,434 crore through mainboard IPOs, 17 percent lower than the Rs 59,302 crore mopped up by 40 IPOs in 2022.

Also Read: IPO party to be alive and kicking in 2024; OYO, First Cry in queue to raise money