EXCLUSIVE - SEBI mulls over rectifying this listing anomaly in IPOs worth Rs 250 cr or less - details

The anomaly is regarding significant difference in the listing price of stocks on the two exchanges – BSE and NSE

Zee Business has learnt from its top sources that SEBI is working on a solution to remove this problem. Brajesh Kumar reports

Market Regulator Securities and Exchange Board of India (SEBI) is working on a plan to remove an anomaly in the listing of Initial Public Offering (IPO) of issues which are worth Rs 250 cr or less. The anomaly is regarding significant difference in the listing price of stocks on the two exchanges – BSE and NSE.

Zee Business has learnt from its top sources that SEBI is working on a solution to remove this problem. Brajesh Kumar reports.

The regulator may consider equilibrium prices on the two exchanges in the pre-opening session and do an average to arrive at the price. This will ensure that there is no difference in the price of a stock on the two exchanges. Currently there is a 5 per cent circuit filter on the equilibrium price. Also intraday trading is not allowed for 10 days. This creates a situation where there is a price difference from the issue price of a IPO stock at the two exchanges.

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The similar problem of price discovery was witnessed this year in case of listing of Veranda Learning Solutions IPO in April. The company share was issued at a price of Rs 137 per share in the IPO. However, on NSE, the equilibrium price was at Rs 125 in the one-hour pre-opening session. Meanwhile, on the BSE the equilibrium price was Rs 157. So the price difference in the equilibrium price was Rs 32 in a share that was issued at a price of Rs 137. There was a significant difference in the closing price of the stock on the listing day as well.

On NSE, the Veranda Learning Solutions ended at Rs 160 while on the BSE it ended at Rs 131.

Usually there is a price difference of some paise on the two exchanges for any stock. But in this issue there was a significant price difference.

Realising this problem in the system, SEBI is working to remove it. A meeting of SEBI’s Secondary Market Advisory Committee also took place to deliberate on this issue. It was decided that the price on two exchanges will be averaged to arrive at the right price.

In IPOs over Rs 250 cr, the circuit filter is 20 per cent. In these cases, there is high possibility of prices getting adjusted if there is a listing difference. In stocks where the circuit filter is 5 per cent, it is difficult to achieve a similar price on a stock on the two exchanges .

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The move is in the wake of making the price discovery system more robust. A greater price difference is taken advantage of on many occasions.

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