Sebi Proposes Reforms for IPO and Relisting Price Discovery in India
Sebi proposes major IPO, relisting rule changes to improve price discovery: Report
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India's Securities and Exchange Board of India (Sebi) is proposing significant changes to the price-discovery process for initial public offerings (IPOs) and relisted stocks. The reforms aim to enhance efficiency by modifying the base price determination and adjusting the price band mechanism during the pre-open auction session, addressing issues with rejected investor orders.
- 01Sebi plans to revise the base price for relisted companies using the latest traded price, not older than six months, or independent valuation certificates if unavailable.
- 02For shares suspended over six months, the base price will be determined using the lower of two independent valuers' book values.
- 03The current dummy price band system for IPOs, ranging from -50% to +100%, has led to high rejection rates of buy orders.
- 04Sebi proposes a flexing mechanism to widen the price band by 10% when the equilibrium price nears its limits.
- 05Public comments on these proposals are invited until June 11.
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India's capital markets regulator, the Securities and Exchange Board of India (Sebi), is considering major reforms to improve the price-discovery process for initial public offerings (IPOs) and relisted stocks. The proposed changes address inefficiencies in the current framework, particularly concerning the rejection of investor orders due to restrictive price bands. Sebi aims to revise the method for determining the base price for relisted companies by considering the latest traded price only if it is within six months. If such prices are unavailable, valuation certificates from independent agencies will be used. For stocks suspended for over six months, the base price will be based on the lower of two independent valuers' assessments. Additionally, Sebi is looking to enhance the opening price mechanism for IPOs, as the existing
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These proposed changes aim to enhance the efficiency of the IPO and relisting process, potentially leading to better price discovery for investors.
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