Fixing of price of shares under initial public offerings (IPO) and especially role of Securities and Exchange Board of India (“SEBI”) in handling such price fixing matters is one of most discussed and contested aspect of the capital market regime.
SEBI has recently issued a clarification about its role in handling of price fixing mattes – SEBI has said that it is not SEBI’s job to tell companies what price such companies have to put on their shares in IPOs – Companies are free to fix the price of their shares.
However, SEBI has made it clear that:
a) Companies shall have to follow procedures specific to filing of IPO documents or making them public.
b) Companies need to disclose the variance in price of shares between different issues of shares.
For illustration purpose: If a company issued its shares to a private investor for INR 200 per share in the year 2021. The same company has issued shares to public for INR 500 for each share. In this case, the Company needs to disclose the reasons (external or internal) for variation between price of two different issues of shares
c) In a response to a question about significant downfall of pricing of shares of recent IPOs issued by many companies from initial pricing value of shares – SEBI said that investment bankers need to answer to this query.
At organizational level also, SEBI is taking some measures to further strength SEBI mechanism. Such measures include:
a) Appointment of one out of every three officers working under its wing with core job of such officer being to come up with new age ideas that could make industry stakeholders happy and serve for a health progress of capital market regime.
b) Gathering of data and information about different segments operating under SEBI to make process more transparent by seeking appropriate disclosures from the companies and investors.
c) Brining more radical changes at organizational level to make resources working under its wing more efficient and capable of providing new ages solutions to complex problems facing by capital market.
This should bring some clarity in investors’ mind about SEBI’s say in IPO pricing.
