The Securities and Exchange Board of India (SEBI) has initiated a significant overhaul of the price discovery mechanism for Initial Public Offerings (IPOs) and re-listed companies through a newly released consultation paper. The regulator aims to address concerns regarding the distortion of initial trading values caused by the use of dummy price bands and outdated base price setups. SEBI noted that these practices have led to artificially suppressed price discovery, resulting in persistent buying pressure and shares frequently hitting upper circuit limits.

One key aspect of the proposal is the revision of base price calculations for re-listed scrips. Currently, when a trading suspension is lifted after more than a year, the base price often defaults to Rs 10. The new approach would use the latest closing price for revocations within six months or fresh valuation certificates from independent chartered accountants for longer suspensions. Additionally, SEBI plans to implement automation to allow flexible execution of price bands during critical trading periods. A successful call auction will now require participation from at least five unique, PAN-verified buyers and sellers. Stakeholders are invited to provide feedback on these changes by June 11.