The Securities and Exchange Bureau of India (SEBI) could bring in new rules with regards to pricing of public share sales of new-age companies. The regulator may take a final call on this during its board meeting on 30 September. If the decision goes ahead, SEBI may mandate more disclosures from companies who are planning to launch initial public offerings (IPOs). SEBI may mandate companies to divulge the rationale behind the difference between the pre-initial IPO placement and the price asked in the public issue. The issue of price difference has been debated fiercely, ever since the price of new-age companies like Paytm and Zomato slid sharply from their issue price after they were listed on the exchanges.
SEBI may also bring transactions in mutual fund units under the insider trading regulations. The regulator could also ask companies to disclose their key performance indicators (KPIs) in the offer documents.
According to what a senior industry official told the Financial Express, SEBI may ask companies to disclose metrics that were part of previous private funding rounds. “Whatever metrics were used at the time of investor presentations during the private funding rounds can be used for making the relevant disclosures at the time of IPO,” the official stated.
‘Your price, your business’:
SEBI chairperson Madhabi Puri Buch had said on Tuesday that the regulator has “no business” in suggesting the price of the public issue, but companies need to disclose what prompted them to change their valuation.
“At what price you choose to do your IPO is your business. We have no business to suggest the price…You are free to price the issue at whatever price you consider appropriate,” Buch stated.
The SEBI chairperson added, “At times, a company places its equity with a private party at Rs 100 six months before the IPO but it comes to the market at Rs 450. We have nothing to say. But we expect you to disclose to the investor what accounts for the difference and what has changed.”
