SEBI plans concise offer documents to help retail investors navigate IPOs

Securities and Exchange Board of India (SEBI) is preparing measures to make corporate disclosures easier to understand, chairman Tuhin Kanta Pandey said, as retail investors pour into equities and debate intensifies over the lofty valuations of new-age companies going public.

In an interview with The Economic Times, Pandey said that SEBI is working on guidelines that will require companies to provide a concise summary of key information in their offer documents, helping investors navigate complex data.

“We are planning further reforms to introduce a concise summary of key points for easier comprehension,” he said.

Asked about concerns over steep IPO pricing, Pandey said valuations are ultimately a market function, not a regulatory one.

Investors, he said, must rely on disclosures and make their own calls.

“If an investor is concerned about valuation, they are entirely within their rights not to subscribe to the issue,” he said. “A company’s fundamentals do not change ten times a day, but its stock price may move ten times a day.”

Pandey said SEBI’s priority is to ensure high-quality disclosure, not to intervene in price-setting.

“Fund managers who invest crores certainly do not do so without due diligence,” he added.

The SEBI chief also addressed concerns about founders receiving preferential shares at steep discounts shortly before an IPO, an issue that has sparked questions about fairness to public investors.

While such transactions are legal and disclosed, SEBI may consider tightening rules if it finds a “systemic issue”, he said.

Pandey defended the wave of offer-for-sale (OFS) driven IPOs, which have allowed private equity investors to offload stakes. In high-risk, early-stage ventures, he said, it is reasonable for early investors to seek partial exits once companies mature.

“There is no contradiction between a private equity investor exiting and the broader purpose of the primary market,” he said, adding that outsized returns from a few successful bets often compensate for failed ones.

The regulator is also working with the Reserve Bank of India on issues related to trade settlement and exploring the introduction of a closing auction mechanism, which passive funds say would reduce tracking error.

Pandey declined to comment on the recommendations of a newly formed committee on conflicts of interest within SEBI, saying the board would review the report first.