How does SEBI plan to tighten the IPO pricing norms for new age and technology IPOs?

Broadly, the new SEBI regulations are focussed on greater transparency and a better explanation of the pricing logic. This is specifically with reference to new age companies. Any move by SEBI that brings about greater transparency is better. Digital IPOs became contentious, especially after the sharp correction from peak prices. The fall was in the range of 30% to 60%, raising serious questions about how IPOs were priced and sold to investors.

The second aspect is the more complex aspect of justifying valuation metrics. Regulators have called for a detailed note on justifying the price of IPOs of new age companies. These new age companies are typically loss making so the traditional market parameters like P/E ratio and earnings don’t work. To address this gap, SEBI wants the key performance indicators (KPIs) as stated in the new age IPO and other non-financial parameters audited.