Unveiling Malpractices in IPO Bidding: Sebi’s Bid to Safeguard the Primary Market

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The Securities and Exchange Board of India (Sebi) is gearing up to tackle malpractices in the primary market, particularly focusing on the bidding process of Initial Public Offers (IPOs). Sebi Chairperson Madhabi Puri Buch recently shed light on the alarming trend of inflated bidding numbers and the utilization of numerous mule accounts during IPOs, emphasizing the need for regulatory measures.

During an event organized by the Association of Investment Bankers of India (AIBI), Buch presented compelling data indicating instances where IPO bidding numbers were artificially inflated. The use of mule accounts, she noted, has become a prevalent issue, raising concerns about the integrity of the IPO process.

This is not the first time that Sebi has addressed the menace of mule accounts. Buch had previously highlighted the issue in March 2023, indicating a persistent problem that demands regulatory attention. Now, with a renewed focus on the matter, she confirmed that Sebi is actively considering measures to curb these malpractices.

“Should you expect some measures to come from Sebi in that direction, I think the answer is yes,” Buch affirmed, signaling the regulatory body’s commitment to safeguarding the fairness and transparency of IPOs.

Sebi’s approach involves not only identifying malpractices but also formulating new rules to address these issues effectively. The intent is clear: to instill confidence in investors and maintain the integrity of the primary market. The regulatory body is poised to take action against alleged wrongdoers, signaling a strong stance against any attempts to manipulate the IPO process.

The revelation of bid inflation and the use of mule accounts in IPOs underscores the need for vigilant regulatory oversight in the fast-evolving landscape of financial markets. As IPOs gain prominence as a preferred fundraising avenue for companies, ensuring a level playing field for all investors becomes imperative.

Sebi’s proactive stance in recognizing and addressing these challenges reflects a commitment to fostering a robust and trustworthy market environment. Investors, merchant bankers, and other stakeholders eagerly await the forthcoming measures from Sebi to fortify the IPO ecosystem against malpractices and promote a fair and transparent capital market landscape.