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Sebi seeks pricing rationale for fund-raises before IPO

Mumbai: Markets regulator Sebi on Friday said IPO-bound companies will have to disclose the basis for pricing for all private fund-raisings done up to 18 months before the public offer. Sebi chairman Madhabi Puri Buch had said that some of the recently listed tech-driven companies had offered their shares in the IPO at prices which were much higher than the prices at which they had placed their shares to a handful of investors.

After the Sebi decision, companies that want to go public will have to disclose the reasons behind any price difference between IPO price and the pre-IPO prices. If a company is offering shares in the IPO at Rs 450 and the same shares were sold to a handful of investors just a few months ago at Rs 150, Sebi would like to know what had changed in the company between these months that could justify this hike in IPO price.

Sebi board “approved the proposal to mandate the issuers coming out with IPO, to make disclosure of Key Performance Indicators (KPIs) and price per share of issuer based on past transactions and past fundraising done by the issuer from the investors under ‘Basis for Issue Price’ section of the offer document, and in price band advertisement,” a release said.

The companies should disclose price per share of the issuer company based on primary/new issue of shares and based on secondary sale/acquisition of shares, during the 18 months period prior to IPO, the release said. In case there are no such transactions in the previous 18 months, then the price at which the last five primary or secondary transactions, not older than three years prior to IPO, should be disclosed.

Sebi board also approved pre-filing of offer documents by an IPO-bound company without giving out confidential information about it. Under the pre-filing process it could also get Sebi’s initial observations and then it could decide to file the draft document for IPO.