SEBI regulated rules amid IPO hysteria

Witnessing astonishing figures of Indian IPO in 2021, the market regulators decided to regulate the rules for Initial Public Offerings, with a view of handling the regulatory gaps and the capricious stock price on their opening day. The new rules regulate various processes like pricing the IPOs, information regarding when can the investors sell their shares, how much can the shareholders sell on their listing days. These regulations were introduced and approved by SEBI [Securities Exchange Board of India] in the wake of the rising IPO frenzy.

The new rules restricted the large shareholders from selling their holdings on the very day of listing. These shareholders can sell 50% of their holdings on listing day but not their entire holdings.

Besides this, SEBI also increased the duration of the lock-in period to prevent losses for retail investors. The duration of the lock-in period was increased from 30 to 90 days to evade the capriciousness in stock prices. The regulators felt the need to extend the lock-in- period as they felt that the presence of Anchor Investors exhorts confidence in the market and their sudden exit results in volatility in stock prices.

Scrutinizing the scenarios of major IPOs, like Zomato and Paytm, they noticed a snapping decline in the shares after the anchor investors sold their holdings. Thus, the regulators concluded to extend the lock-in period to maintain confidence in the market.

Further, SEBI also mandated the necessity of a valuation report if the company allots more than 5% of its share to any entity.

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