SEBI boss flags existing investors using new age internet IPOs as exit window, mulls regulation

SEBI chairman Ajay Tyagi on Wednesday raised concerns about the newly-listed internet companies using IPOs to provide exits to existing investors, adding that it will soon modify regulations for listing of such new age firms.

SEBI Chairman Ajay Tyagi

SEBI chairman Ajay Tyagi on Wednesday raised concerns about the newly-listed internet companies using IPOs to provide exits to existing investors, adding that it will soon modify regulations for listing of such new age firms. “Recently, there has been an increasing trend of new age tech companies also known as Growth Companies coming out with their IPOs,” Ajay Tyagi, chairman of the Securities and Exchange Board of India (SEBI), said at an event. “Such companies access capital markets both to provide exit to existing investors and to fund their growth ambitions. These non-traditional companies offer additional regulatory challenges,” Tyagi added.

In 2021, the Indian stock exchanges ranked 7th in terms of number of IPOs and 8th in terms of IPO proceeds globally, Tyagi said, adding that the participation of retail investors grew sevenfold this year to 5.43 crore as of November this year in comparison to 2019. This year, market watchers witnessed an initial public offering (IPO) boom with a record number of technology firms such as Paytm, Zomato, Nykaa and Policybazaar getting listed, and Oyo and Snapdeal filing for IPOs. The blockbuster listings have also shown some existing investors exiting their stakes at the time of listing.

Tyagi also stressed on the need to tweak regulations for these new age tech companies that have a significantly different business model from the firms listed traditionally. He called on the merchant bankers who facilitate the IPO process to ensure fairness in pricing. “Appropriate pricing of the issue is a crucial aspect. A proper balancing act between the issuers’ aspirations and investors’ interests is required. The merchant bankers need to engage with a wider set of potential investors,” Tyagi added.

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