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Thursday, October 21, 2021

Ajay Tyagi: IPO price discovery not as ‘transparent’ as stock markets

In 2021 so far, 41 companies have floated IPOs and raised about Rs 64,244 crore from the market. In 2020, at least 16 companies raised Rs 37,350 crore through IPOs.

By: ENS Economic Bureau | Mumbai |
September 17, 2021 4:07:09 am
Sebi Chairman Ajay Tyagi. (File)

Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi on Thursday said the initial public offering (IPO) market price discovery is not as “transparent and efficient” as secondary market price discovery and urged retail investors to “focus” more on secondary market since there is greater disclosure for listed companies.

In 2021 so far, 41 companies have floated IPOs and raised about Rs 64,244 crore from the market. In 2020, at least 16 companies raised Rs 37,350 crore through IPOs. Majority funds raised by these IPOs in the last 2 years were in the offer for sale segment, which provided venture capitalists and early investors a partial or full exit.

Tyagi, who spoke to media at the Financial Markets Summit organised by CII, said the regulator is moving towards a shorter settlement cycle in a phased manner due to representations made by the foreign portfolio investors (FPIs). Sebi has introduced an optional T+1 trade settlement cycle for domestic investors from January 1. This, as per Tyagi, was done in the interest of investors.

“The transition from T+3 to T+2 took place in 2003. There is a need to reduce it further now as there has been significant reforms in the payments and banking system. Investors have the right to receive what they purchase as quickly as possible. T+1 settlement cycle is in the interest of all market participants,” he said. Tyagi also said the new peak margin norms imposed by Sebi are in everyone’s interest.

Starting this month, Sebi has barred brokerages from allowing any additional intraday leverages for equity and derivatives trading. On the issue of shareholder activism, he said it “is good for everyone, especially minority shareholders.”

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