Sebi’s consultation paper over share pricing disclosures of new-age IPOs a welcome step, says Anil Singhvi; lauds regulator over its sense of urgency

Securities and Exchange Board of India (SEBI) has issued a consultation paper on the pricing aspect of new-age Initial Public Offerings (IPO). The Indian market regulator is keeping a close watch on the pricing of share of these new-age companies, Zee Business Managing Editor Anil Singhvi said. 

The Market Guru praised SEBI for its alacrity over the issue which is unlike yesteryears when decisions took a lot of time to get implemented. He said that Sebi's turnaround time of taking action has reduced significantly.

He said that the new age IPOs have started coming now and SEBI has brought a consultation paper at the beginning of 2022 and has sought view and stakeholder feedback on this by 5 March. This will be followed by new guidelines.  

Sebi on February 18 proposed that loss-making new age technology companies planning to launch their IPOs should make disclosures about their key performance indicators considered while arriving at the price of the shares. The disclosures must come in offer documents. 

Zee Business’ Managing Editor, Anil Singhvi, explained this step of Sebi and its new stringent criteria for the new-age IPOs.

Singhvi said that to help investors make informed decisions, new-age tech firms should explain the formula or the price discovery mechanism of the shares to be issued.  

In detail how they priced their shares for initial public offerings (IPOs), compare them to pre-IPO share sales, and publish all pre-IPO investor presentations.

Singhvi explained that Sebi has observed that many of these companies that do not have a proven track record of profitable operations for at least three years are launching IPOs. Such companies have generally been loss-making for a long period before achieving break-even as they opted for scale over profits during their growth phase.

Singhvi said that before filing offer documents, such companies should disclose valuations based on new share issuance and acquisitions during the preceding 18 months. And if they have offered equity worth more than 5 per cent, that will be needed explaining as well.

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— Zee Business (@ZeeBusiness) February 21, 2022