SEBI has “no business” in suggesting IPO prices for new-age tech companies, and it is the investment bankers who should allay any concerns over the matter, chairman Madhabi Puri Buch said Tuesday.
Ms Buch, an investment banker turned regulator, said companies should be more open about how valuations have changed between a pre-initial public offering (IPO) placement of shares and the price being asked in the issuance.
“Much has been said about the pricing of IPOs from the new tech companies. Our vision is simple. At what price you choose to do your IPO is your business. We have no business to propose the price… You are free to price the problem at any cost you see fit,” Ms Buch said at an event hosted here by industry lobbying Ficci.
It can be noted that there are concerns about investors, especially the unsuspecting retail companies, who are being fooled by the high valuations sought by new-age tech companies.
Payment platform Paytm’s share price plunged to a third of the IPO’s issue price within weeks of listing, and a few other companies also faced similar results.
Amid speculation about SEBI’s response to such issuances, a member of the public asked MS Buch about corrective action that could be taken to protect investor interests.
Ms. Buch parried the question, saying that there are many i-bankers who sell such issues in the audience and also on the podium from which she spoke, and it is up to the i-bankers to respond to such concerns.
To make the point about disclosures, SEBI’s first female chief explained using an example of a company that sold shares to investors for Rs 100 and then asked for Rs 450 in an IPO within a few months.
She said a company is free to charge a higher price, but it must disclose what happened in the intervening period, justifying the massive change in valuation.
Meanwhile, she also said SEBI is analyzing data and information on retail participation in the futures and options segment, which may lead to more information becoming available to them.
“If someone wants to trade in the M&D segment, we don’t think we should stop them… (but) we evaluate in what form and manner (the information) should be disclosed to the public that wants to participate in the M&D market “, she says.
She said SEBI will remain consultative and democratic in its approach while making regulation and driven only by data.
As part of a reorganization exercise, SEBI has appointed one to three officers in each department whose main resource area is to come up with regulatory ideas that will make the industry “celebrate,” she said.
The regulator has also looked for changes to the SEBI law that will help it test potential ideas in a regulatory sandbox, she said.
Going forward, SEBI will continue to reinforce the importance of transparency in each of its regulations, Buch assured the industry, underlining that “our is a disclosure-based regime”.
SEBI exists to facilitate capital formation on both the debt and equity fronts in the economy, and aims to shed all dogma as it charts its way forward, Buch said.
When asked, she opined that SEBI is against regulating mutual fund distributors, and that it is up to asset managers to ensure that their agents are working properly.