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Friday, January 18, 2008

25% listing price band for issues up to Rs 250cr: Sebi

The Securities and Exchange Board of India is proposing a 25% price band on listing day for issues up to Rs 250 crore, reports CNBC-TV18. At present, there are no price bands on IPOs above Rs 500 crore, if they are represented in the F&O market. The market regulator proposal is on account of increased volatility in issues less than Rs 250 crore.

How will this impact IPOs?

If we step back for a moment and analyze the way IPOs have performed in the first year of listing, most of the IPOs- Manaksia, Precision and Aries Agro; on the first year of listing, have registered an average increase of 76%.

That is a number that has come under the lens of the regulator because a lot of long-term investors have a problem with the fact that IPOs, on the first day of listing, tend to perform so well. Then, through the rest of the days, there is not much of a performance seen in those stocks.

Long-term investors say they stand to lose. Especially, in stocks that have lesser float and are smaller in size, as compared to large IPOs, there is room for some amount of manipulation. Therefore, this move has come from Sebi to protect the investors interest.

Sebi does recognise the fact that it is not exactly in the principle of having free market. But this move actually comes to protect the investor’s interest, so that there is no price manipulation in the first day of listing, as far as the smaller IPOs are concerned.

Are there any reactions yet to this proposed move?

Most of the people say that it is a fairly good move. CNBC-TV18 has not spoken to the smaller set of investment bankers, who are actually coming out with these issues. There could be some amount of complaining that could come from them. In fact, there could be a lot of investors, especially in the HNI category, who would complain because most of them actually tend to play in IPOs of the below Rs 250 crore size.

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