![]() ![]() Lastly the Market Regulator SEBI needs to have its own assessment with regard to pricing particularly in respect of issues of companies having been in losses and yet being priced heavily for the purpose of IPO. In absence thereof it may, in exceptional cases, be possible to raise money but would not be possible to sustain the market value of the company. Promoters need to be ambitious but realistic in the business plans and revenue models. Failing this could have disastrous consequences. For pricing of an IPO, Competition, Cash Flows, Costs and Conservatism are going to be key.Įffects of possible competition which may affect costs to retain market share and their impact on cash flows would ultimately drive Investment Bankers and Market Regulator to be conservative while pricing the IPO. To me four ‘C’s are going to be very relevant. IPO plans of start-ups are going to be hit pretty badly. And certainly the pricing in case of IPOs may not be as attractive as some of the promoters would wish it to be. Secondly the market regulator with a view to avoid any such fiasco shall be examining the business and revenue model far more stringently.Īll this may lead to delays in IPOs. Frenzy with regard to IPOs is likely to come to a halt.įirstly Investment Bankers are bound to be far more vigilant on pricing aspects. This is bound to have a dampening effect on the IPO plans of other start-ups. From an investor’s perspective it has been a disaster with no hope of recovery in the foreseeable future. And what happened subsequently is a matter of great regret from a governance point of view. SEBI did not question the Investment Bankers enough to be in a position to challenge the pricing. Investment bankers accepted the assumptions given by promoters and management and probably were more guided by the euphoria that Paytm had created in the market in fintech sector post demonetisation period while ignoring the cash flows, losses and tough competition from rivals and priced it ambitiously. ![]() It appears that promoters probably gave over ambitious plans and consequential exaggerated revenue and underplayed the possible challenge to market share in future. These include Promoters, Directors, Management, Regulators, and Auditors and so on. There are various players of corporate governance. A market regulator cannot be mute spectator to reckless behaviour of promoters and Investment Bankers. In case of entities which have been incurring losses and are priced highly for IPO purposes market regulator has an onerous obligation to look in to the business model, revenue model, cash flows, PE multiples along with other assumptions determining pricing of IPO and it cannot just accept and allow the IPO at a price determined by Investment Bankers alone. Pricing cannot be left to be decided by Investment Bankers alone based upon roadshows etc. It is expected that the market regulator would be subject DRHP and other documents filed with it to stringent scrutiny and permission for IPO/FPO would be granted only after being satisfied in all respects including pricing of the issue. Offering will include a mix of new and existing shares to meet regulatory obligations in India, which requires 10% of shares to float within two years and 25% within five years.SEBI cannot assume the role of a post office to receive and deliver the document.The start-up, backed by investors including Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), SoftBank Group ( OTCPK:SFTBY) and Ant Group (NYSE: BABA) is targeting a valuation of around $25B-30B.Employees can participate in the IPO by consenting to offer all or part of their equity shares and shares not sold during the offering would be locked-in for a one-year period, Amit Khera, One97’s secretary, said in the notice to employees and shareholders.Sources said, the board has approved the offering plans in principle and is finalizing the draft red herring prospectus, to be filed in the first week of July. ![]()
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