In what could be a big blow to the grey market for unlisted companies, Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey suggested the idea of a pre-IPO share trading platform.
“Think of an initiative, on a pilot basis for a regulated venue where pre-IPO companies can choose to trade, subject to certain disclosures,” said Pandey, at the FICCI Capital Market Summit in Mumbai.
He also added that with a booming IPO market, investors are eagerly anticipating what’s next. “Yet pre-listing information is often not enough for investors to make an investment decision,” he said.
This new platform may permit investors to trade shares in a regulated manner, and if it takes off, it has the potential to replace the existing unregulated grey market.
The Need for a Regulated Venue
Currently, unlisted shares of companies large IPO-bound firms such as Tata Capital and the National Stock Exchange (NSE) are actively traded in the grey markets with high liquidity. The shares of many new-age unicorns are also hotly traded in such parallel markets.
He also outlined some of the key challenges, which cause avoidable friction in fund-raising, disclosures, and investor onboarding – and how they can be removed. “With emerging areas, products and asset classes can be developed for creating both demand and supply of capital,” Pandey said.
A Broader Vision: Easing Capital Raising
With a healthy primary market where ₹4.3 lakh crores was raised in FY25 and a strong fundraising pipeline of ₹1.40 lakh crores, there is a good supply of fresh stocks.
“We have growth momentum with us. It is time to convert it into a flywheel,” he said.
He also emphasised on a host of other issues. These include robust regulatory framework, increased transparency and technology, trust in the system, greater investor participation, deep and liquid market, better price discovery, lower cost of capital, greater investment and innovation.
“We have worked to shorten IPO timelines, to enable safeguards such as blocking of funds and direct payout; and to establish digital processes that reduce cost and time,” Pandey added.
“Innovative regulatory approach has helped establish new asset classes, new classes of investors and new methods of raising risk capital. AIFs, REITs, InvITs, SIPs, SIFs, PMS- these acronyms now occupy an important place in the Indian capital market,” he added.
Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to risk assessment and monitoring, fraud detection and financial inclusion. However, Pandey said that one has to think of AI as an assist, not a substitute.