SEBI won’t interfere with IPO pricing process says SEBI chief Madhabi Puri Buch but favours better disclosures

• SEBI chief Madhabi Puri Buch asked IPO bound companies to maintain proper disclosure of equity value since inception.
• Front running, insider trading, information asymmetry, fraudulent transactions, manipulations of stock prices are our versions of smallpox and polio, she said in her maiden address.
• SEBI has nothing to do with what price a company chooses for an IPO but urges to disclose every piece of information before going public.

In her very first public address Madhabi Puri Buch, the chairperson of Securities and Exchange Board of India (SEBI), asked the industry to abide by regulations and sought out for more transparency, and better disclosures from IPO bound companies.

“Without industry support it is difficult for SEBI to get rid of all evils that we know of -- front running, insider trading, information asymmetry, fraudulent transactions, manipulations of stock prices,” said Buch speaking at FICCI’s ‘Annual Capital Markets Conference’ event.

“I don’t think that we can claim that we have rid the market of its own peculiar versions of smallpox and polio,” she added.

This was Buch’s first public address after being appointed over six months ago on February 28.

In her address, she highlighted SEBI’s take on IPO pricing, lack of disclosure ethics by corporates, and frequent fraudulent activities.

Buch also said that SEBI aims to pace with the development in the industry, as businesses grow.

“On one hand the world is moving so fast, all businesses are changing so rapidly, the markets are evolving so skiddly, I assume you expect the regulator to keep pace with you, then how can we say that we will come out with the regulations once in a year and with that format expect to keep pace with you,” said Buch.

On growing F&O trades among retail investors, Buch said that SEBI doesn’t want to restrict investors from trading as people are free and have all right to have access to every asset class.

“Since this is your public conference since you took over as SEBI Chairperson and mine too, let me commit to you that NSE will fully and completely follow and implement the agenda set up by SEBI to enhance capital formation using public markets, increase people in the ecosystem, users and technology to achieve that and create a better and more vibrant bond and hybrid market,” said Ashish Chauhan of MD and CEO of National Stock Exchange.

‘SEBI has nothing to do with what price a company chooses for an IPO’

Buch also touched upon the issue of pricing of the IPOs of tech companies. She said that SEBI has nothing to do with what price a company chooses for an IPO; but urged them to disclose every piece of information before going public.

“If the company coming to IPO three or six months ago has placed its equity with some party (assume private party) at ₹100. And now it wishes to come to the market at ₹450. No problem, we have nothing to say in that. However, expect you to disclose to the investor what accounts for the difference between ₹100 and ₹450. Explain what has changed from the time you placed equity,” explains Buch.

Her answer cleared the air around a lot of press reports which said that the markets regulator will mandate the disclosure of a logic behind an IPO’s pricing. However, investors have been complaining to the SEBI regarding the disclosures of tech companies.

"The days of the Competition Commission of India (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," said Buch.

PayTM’s price band for its IPO was much higher than its private placement price and a lot of investors have since questioned that. Zomato’s Blinkit acquisition disclosures also came under the lens after a group of high-networth individuals reportedly complained about it.

SEE ALSO:
India Post Payments Bank partners with Koo to promote financial literacy in tier-2, tier-3 cities and remote cities
Rupee rises 28 paise to 79.25 against US dollar in early trade