{"id":84405,"date":"2018-06-25T06:46:06","date_gmt":"2018-06-25T06:46:06","guid":{"rendered":"http:\/\/www.bnreport.com\/why-new-sebi-ipo-norms-still-do-not-go-far-enough\/"},"modified":"2018-06-25T06:46:06","modified_gmt":"2018-06-25T06:46:06","slug":"why-new-sebi-ipo-norms-still-do-not-go-far-enough","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/why-new-sebi-ipo-norms-still-do-not-go-far-enough\/","title":{"rendered":"Why new Sebi IPO norms still do not go far enough"},"content":{"rendered":"

Markets regulator Sebi<\/a> has hardly broken new ground with its tweaking of issuance rules. The changes include allowing issuers to announce price bands two days, instead of five, before the issue opens for subscription. The reasoning is that this would help issuers handle market volatility better. <\/p>\n

Short-term price fluctuations are a concern when the primary goal of subscribing to a public issue<\/a> is to flip the share at a profit on listing. <\/p>\n

Subscription to a companys IPO<\/a> should be driven by the issuers long term prospects. More fundamental reforms are needed for efficient price discovery and the success of an issue at a decent price for the issuer. <\/p>\n

The price band fixed by the merchant banker is not a scam only because the law is lax. The issuer should be free to fix a reserve price and make that number public. Determining the IPO price should be left to would-be subscribers who make up their mind based on the extensive financial information the company is mandated to make public. <\/p>\n

If retail investors<\/a> do not have the expertise to determine a realistic price based on the information available, they should join a pool of market innocents who rally behind a savvy broker or an investment fund, or simply stick to the secondary market. Let knowledgeable investors submit their bids in terms of price and quantity. <\/p>\n

Assign the highest price bid to as many shares as it asks for. Go down the order of bids till all the shares on offer are sold. Googles public issue used a variant of this, in which all bidders got shares at the selfsame price, the highest one at which all the shares on offer were sold. <\/p>\n

Spotify used direct listing, dispensing with the services of merchant bankers altogether. The saving on cost would be considerable. <\/p>\n

Tweaking the definition of a promoter<\/a> to include immediate relatives is welcome. But not raising the threshold to 20 per cent from 10 per cent, for defining a promoter group, as it is at odds with the threshold at which foreign investment is recognised as direct. The new threshold would not recognise a foreign direct investor holding less than 20per centas a controlling interest. <\/p>\n

<\/a><\/strong> <\/a><\/p>\n

Original Article<\/a><\/p>\n

[contf]
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ET Markets<\/a><\/h5>\n

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