Should SEBI really leave the regulation of new age IPOs to market forces?

SEBI is obviously the best judge when it comes to complex capital market regulation. However, let us first look at the model that SEBI wants to adopt to regulate these new age IPOs. SEBI has called for more comprehensive disclosures, including key performance indicators (KPIs), for such new age IPOs. In short, SEBI wants the same extensive disclosures to retail investors in the prospectus as made to venture capitalists and PE investors.

Greater transparency and deeper disclosures are always welcome in the larger interests of capital markets. But there are two things to be cautious about. Many of the IPOs announced are now putting of their IPO dates due to the market conditions. More regulations will only dampen their enthusiasm. Also, players like Swiggy and Byju’s that are yet to file, are most likely to put off their filing plans if the requirements get too stringent. We need to be real.

The past experience has been that too much regulation does not work in such emerging and sunrise sectors. Such businesses are essentially known to be bets on macro and technology trends. In such cases it is hard to give any credible linear estimates or any worthwhile extrapolation of business trends. The best that can be initiated is to guide investors about the risk entailed and the need to limit the allocation as well as tone down expectations.