‘Merchant bankers must ensure price is acceptable to issuers and investors’
The capital markets regulator has asked investment bankers to do more due diligence and price public issues more reasonably so that it would be acceptable to both investors and issuers.
“IPOs not clicking is something, which is a cause of worry… Merchant bankers have a role to see that it is reasonably priced and which is acceptable to both issuers and investors,” said Ajay Tyagi, chairman, Securities and Exchange Board of India (SEBI), speaking at a conference organised by the Association of Investment Bankers of India (AIBI).
This is not the first time that a SEBI chairman has flagged the issue of IPO pricing while addressing merchant bankers. Former chiefs including U.K. Sinha and M. Damodaran have all raised this issue in the past at a similar forum.
Mr. Tyagi highlighted the fact that while the regulator had given the go-ahead to IPOs cumulatively worth more than ₹60,000 crore, many companies were yet to launch their issues despite decent market conditions.
Incidentally, data from the National Stock Exchange (NSE) show that shares of almost half of the companies that listed in 2018 are currently trading below their respective issue price.
The SEBI chairman, however, expressed happiness with the progress made by the platform for small and medium enterprises (SMEs), highlighting that the current financial year had seen issues worth ₹1,500 crore, much higher than the previous fiscal’s ₹800 crore.
The SEBI chief also said that the regulatory framework must be made conducive to encourage MNCs to ‘come and list in India’, though one should not force such entities to list here. Recently, a SEBI-appointed panel recommended allowing overseas companies to directly list their shares on Indian exchanges while also allowing unlisted Indian firms to list their equities overseas.