SBI cautions merchant bankers on IPO pricing
Appropriate public issue pricing crucial; i-bankers need to follow rules in letter, spirit: Tyagi
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New Delhi: Seeking to send out a strong message, Sebi Chairman Ajay Tyagi on Wednesday said it was incumbent upon the merchant banker community to not only follow the regulations in letter, but also in spirit as he emphasised that appropriate pricing is crucial for public issues.
While urging merchant bankers to engage in wider consultations as for a proper balance between the issuers' aspirations and investors' interests, he also said that "needless to say, Sebi will not shy away from taking required action if it finds any intermediary not adhering to its mandate."
His remarks assume significance against the backdrop of instances of prices of shares slumping steeply at the time of listing compared to the price at which they were sold in initial public offerings (IPOs). In addition, the regulator will tweak rules for new-age technology companies, Tyagi said at the Association of Investment Bankers of India's (AIBI) annual summit. The Sebi chairman has also listed out responsibility of merchant bankers that includes protecting interest of investors, conducting business with fairness an integrity, ensuring true disclosures to investors in a timely manner, so that investors are made aware of attendant risks before taking investment decision.
"It is incumbent upon the merchant banker community to not only follow the regulations in letter but also in spirit." "It may be an opportune time for AIBI to reflect upon and review the standards of due diligence adopted by merchant bankers in various issue management activities offered by them," Tyagi said. The ongoing fiscal proved to be a bumper year for the IPO markets as 76 initial share-sales raised more than 90,000 crore as of November. Moreover, participation by retail investors in the primary equity market has also jumped.
The number of applications from retail investors in IPOs totalled 5.43 crore so far this fiscal against 3.8 crore in FY21.
The average number of retail applications stand at 15.65 lakh for 2021-22 (till November), Tyagi said. He further said growth in the primary market is accompanied by various challenges, including in the form of non-traditional business models of issuers, disclosure requirements for new-age technology companies and valuation-related apprehensions.
