Sebi Chairperson to Investigate Insufficient IPO Valuation Disclosures if Identified
Sebi Chairperson Madhabi Puri Buch has addressed concerns surrounding potentially inflated valuations in certain initial public offerings (IPOs).
Given the recent surge in IPOs, totaling a record Rs 2.6 lakh crore, concerns have arisen regarding the high premiums attached to some shares, particularly in cases like Tata Technologies. In response to these concerns, Buch has acknowledged the issue, stating that if valuation disclosures are deemed meaningless, the regulator will conduct an investigation.
Expressing skepticism about the justifications provided for high premiums, Buch described them as "meaningless English words." There are concerns that issuers and investment bankers may be quoting low face values to generate investor interest, leading to higher overall pricing due to substantial premiums. Buch stressed the importance of ensuring meaningful disclosures on valuation.
When questioned about the timing of IPOs and whether Sebi plans to advise issuers and market makers on strategic spacing, Buch clarified that market timing falls outside the regulator's purview. She emphasized letting the market determine timing, as SEBI does not want to impose a mandated time that may not be optimal for both issuers and investors.
Addressing worries about market overload due to numerous IPOs, Buch stated that the regulatory focus is on ensuring the system can efficiently handle the load. She reassured that institutional capacity is not currently a problem, and there have been no negative observations in this regard.
Regarding the potential introduction of a green-shoe option, Buch explained that while it may be practical, there are conceptual challenges. Unlike other market instruments, an IPO involves equity dilution, and allowing a green-shoe option could result in undesired dilution and other implications, according to Buch.
