SEBI’s new proposal on the expensive price of IPO after investors trapped billions of rupees in loss-making new age companies

There is a saying in the village – “Ka Barkha Jab Krishi Sukhani…” It means…. ‘It rained when agriculture dried up without water.’ Same is the case with SEBI’s new proposal on IPO pricing. In the past, many companies of News Age brought their IPO which were in loss. Like Paytm, Zomato, Car Trade, Nykaa, Policy Bazaar.

There was a lot of difference of opinion regarding the IPO price and valuation of these companies. Now the condition is that after the listing, the share price of most of them has come down to less than half. Therefore, billions of rupees of investors are stuck in these IPOs. A large number of retail investors are also trapped by investing money in them.

More information should be given regarding issue price
Now the market regulator SEBI (SEBI) is going to bring a new proposal for clarity on many things related to the price or valuation of the IPO. Sebi says, “Initial Public Offer (IPO) documents of loss-making new-age companies should contain maximum disclosures related to the issue price. These companies should state in their IPO document the key parameters on which they have reached or fixed their issue price.

SEBI said in a consultation paper that such companies should also make disclosures related to their valuation, which should be based on fresh shares issued in IPO and shares acquired in the last 18 months.

also had no track record of profits
This move of SEBI has come at a time when many new age tech companies have launched their IPO to raise funding in the recent past. Many of these tech companies had no track record of profits in the three years prior to the IPO. Such companies are still in line to bring IPO.

By March 5 Comments and suggestions can be sent
Such companies generally do not reach a position of making profit for a long time. The reason for this is that instead of making profit in their initial years, these companies emphasize on expanding their business and capturing more and more market share.

SEBI has now issued a consultation paper saying what additional disclosures need to be made mandatory regarding IPOs of such loss-making companies. SEBI said that comments and suggestions can be sent on this consultation paper by 5th March on behalf of the concerned parties.