Flaying investment bankers for not carrying out due diligence on IPOs, SEBI chief UK Sinha on Wednesday asked merchant bankers to take measures which can instil confidence in investors, especially the retail ones.
“You can argue that you (merchant banker) are not responsible for the listing price or for the general economy, but going by the data some amount of introspection is required,” Mr Sinha told an investment banking summit here.
“If we failed to do that then whatever efforts we make, we will not be able to draw retail investors into the market for that matter, even institutional investors,” he said.
The market regulator said today an investor, especially retail investor, is “thoroughly confused” about what he/she should expect from the primary market.
“It has become a question of credibility, and we have to make a very serious attempt to restore the credibility,” the SEBI chief said.
Stating that during the period between 2008-09 and 2011-12, there were 117 IPOs, of those 45 were/are trading at a level that was compared to the general decline of the market.
“But two-thirds or 70 per cent of these issues were trading not only below the issue price but also below the price even after adjusting the market decline,” the SEBI chairman said.
“There is something wrong if two-thirds of the issues during 2009-12 are trading below market decline levels...We noticed in some IPOs that due diligence wasn’t done properly and assets mentioned were missing or weren’t even mentioned at all,” Mr Sinha said.
He further said in these issues, for five companies the decline was 25-50 per cent (negative), in 21 it was a higher 50-75 per cent.
Stating call auction data, which shows that volatility on opening day have reduced considerably in the recent past following stricter measures announced by the SEBI, Mr Sinha said the regulator has not received any complaints for the last two-three issues.