Experts analyse Sebi IPO rules, Fitch outlook and their impact on markets
Sebi has proposed tighter rules around the use of IPO proceeds. And, Fitch Ratings has retained India's ratings at the lowest investment grade. How will these impact the primary market? Let's find out
Puneet WadhwaNikita Vashisht New Delhi
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In a bid to safeguard investors’ interest, market regulator Sebi has proposed to tweak rules governing IPOs to bring in more transparency and accountability.
The regulator recently issued a consultation paper in this regard and has sought feedback before the end of this month.
The notable changes include a cap on the amount companies, mainly start-ups, can raise for inorganic growth initiatives and also on the quantum existing shareholders can offload in the IPO.
Further, Sebi has proposed to increase the lock-in period for anchor investors from 30 days to 90 days. It has also called for the monitoring of IPO proceeds.
The proposed tightening of IPO funding comes amidst a galore of public offers which is likely to see a record mop-up of Rs 1 trillion this year. Besides, a bulk this money was raised by new-age and loss-making tech-based start-ups including Paytm, Policybazaar and Zomato.
While the proposals are yet to be adopted, industry players feel changes around anchor investors and cap on OFS quantum could come across as extremely unpalatable, and may have a cascading effect on the Indian capital markets going forward.
Given this, it remains to be seen what the market watchdog will decide after receiving stakeholders’ feedback.
In a separate development, equity investors received a nasty surprise from global rating agency Fitch Ratings.
On November 16, the agency maintained India’s ratings at the lowest investment grade of BBB- with a negative outlook on account of high debt and limited fiscal headroom.
This comes after Moody’s Investors Service recently upgraded its investment outlook to stable from negative.
However, economists believe since India is probably going to be one of the best-performing economies in the world this year, investors should focus on the country’s reform agenda.
These developments, along with inflationary and valuation concerns, are likely to keep the markets volatile in days ahead.
Yesterday, the BSE Sensex fell 314 points to close at 60,008. The Nifty50, too, shed 100 points and ended at 17,899.
Trading volume in the secondary market, however, may remain thin today given a long-weekend ahead. Further, all eyes will be on the listing of Paytm, which concluded India’s biggest IPO last week.
The grey market premium has fallen sharply over the past few days and was in the negative territory on Wednesday.
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Topics :SEBIIPOFitch Ratings
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First Published: Nov 18 2021 | 8:00 AM IST