MC EXCLUSIVE SEBI chief warns investors against ‘listing pops’, says long-term investing is key

SEBI chief warns investors against ‘listing pops’, says long-term investing is key

• SEBI chief urges investors to focus on long-term IPO value
• India's IPO market lauded for strong disclosures, transparency
• SEBI may further refine disclosure and monitoring standards

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Investors should avoid judging public issues purely by listing-day gains, Securities and Exchange Board of India (SEBI) Chairman, Tuhin Kanta Pandey said.  In an exclusive interaction with Moneycontrol, the chairman of SEBI, cautioned against excessive focus on “listing pops”, arguing that equity investing should be evaluated over longer time horizons.

“The point is that if you are looking at from the angle of only a listing pop, then that is not the way I think the market should be. When you are going into investing in a company which is going to work for a long time, you don't really want to become a shareholder for a day” he said.

Pandey said India’s IPO ecosystem is built on strong disclosures that allow investors to independently assess valuations and business models. He noted that detailed comparable data is available in offer documents such as DRHPs and RHPs, enabling institutional and anchor investors to make informed decisions. This, he said, provides market-based discipline in pricing. On the question of IPO quality, Pandey said, “we should not really be stereotyping or brushing with one thing. I think we are a very robust market which is full of disclosures”.

He said investors have a choice whether to put money into an IPO or not. Anchor investors also have their own choice when they participate in the book-building process, and they actively question companies not just on valuation but also on business models. He emphasised that, ultimately, it is the market at work. There will be scenario when markets will move up and down, and that is not in anyone’s control.

Addressing criticism around higher offer-for-sale (OFS) components, Pandey said SEBI’s analysis shows the mix has broadly normalised. Recent IPOs have seen an average split of roughly 55 percent OFS and 45 percent fresh capital, which is in line with historical trends, he said, OFS reached about 87 percent in the year 2020.

On concerns around post-IPO fund misuse by companies as reflected in SEBIs orders of 1-2 years, Pandey said monitoring mechanisms are already strengthening, particularly in the SME segment where exchanges have enhanced scrutiny. He cited the criticisms on both counts, Pandey said, on the one hand, the people will say excessive monitoring is not good. On the other hand, say that some kind of monitoring is also necessary. Pandey said the process is evolving and there could be a third party monitoring as well.

SEBI chairman said regulators ongoing comprehensive review of Listing Obligations and Disclosure Requirements (LODR) regulations could provide an opportunity to further refine disclosure and monitoring standards.

Also read: Full interview of SEBI Chairman Tuhin Kanta Pandey