The Hindu Business Line : SEBI intervention unwarranted on valuations: Experts

The regulator need not protect investors if they indulge in speculative valuations, whether in primary or secondary market, as long as the rules of the game are followed, say market experts.

Recent IPO valuations and price discovery through the reverse book building process do not militate against the regulatory parameters set by the market regulator, but only reflected speculative valuations, felt Mr Prithvi Haldea, Chairman of Prime Database.

The responses to an offer and the listing price amply validated the market’s value perception, he told Business Line. “There is nothing fair or unfair about equity valuation; rather it is in the minds of the investors. Valuation is largely a function of demand and supply; and market regulations should not intervene,” he added, making it clear that he was voicing his personal viewpoint and not that of the market regulator. Mr Haldea is a member of the primary market committee of the SEBI.

Listing Gains

Queried over phone, Mr M. Damodaran, Chairman of SEBI, preferred to reserve his opinion on the matter.

Mr Haldea said the average delivery ratio, a fifth or less, to the total transactions, suggests that the secondary market is currently in the grip of short-term considerations. Emphasis on the listing gains is also a result of the aggregate perception of risk and reward. “Nobody is forcing an IPO price on any investor,” he said.

The reported existence of a grey market for IPOs and its role on the demand for would-be-listed equities has raised quite a few eyebrows in the market circles.

A number of analysts have been airing doubts over prices recommended by merchant bankers and endorsed by IPO raters in recent times in the backdrop of sudden fall in prices soon after listing.

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