Vetting IPOs easier with new Sebi rules

Companies now have to disclose the price per share in previous rounds of fund-raises

- P SARAVANAN

INITIAL PUBLIC OFFERINGS (IPOS) generally provide investors with an opportunity to earn returns, but they are also associated with a high level of risk. Recently, the Securities and Exchange Board of India (Sebi) has advanced the process of bringing changes in regulations by approving amendments to a wide range of issues at its meeting. Let us look into the amendments in regulations related to IPO and how it will be helpful to the investors.

According to Sebi, companies seeking to raise capital through an IPO must disclose key performance indicators that are not disclosed in their financial statements. This is because many firms tend to be lossmakers in terms of operation and it is difficult to value them purely on the basis of their audited financial performance. Hence Sebi has mandated the issuing firm to disclose the price per share in previous rounds of capital raising.As a result, investors will be better able to evaluate the IPO price.

Besides, it is necessary to disclose funds raised over the past three years. The disclosure is strengthened by the that an requirement independent board of directors makes a recommendation regarding the IPO price.