IPOs: A Path or Exit?

Sebi Chairman Tuhin Kanta Pandey and CEA V Anantha Nageswaran address concerns about IPOs being used as exit vehicles for early investors rather than for capital formation. The offer-for-sale component in IPOs has increased to 57%, highlighting the need for a shift in capital market practices.

Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey tackled concerns on Wednesday about initial public offerings (IPOs) increasingly being used for offer-for-sale (OFS) rather than for raising new funds. He emphasized the necessity to view this trend from a broader capital formation perspective.

Meanwhile, Sebi's whole-time member Kamlesh Varshney warned that exit routes are essential for attracting investments, cautioning that the lack of such options could deter necessary funds from entering India.

The Chief Economic Advisor, V Anantha Nageswaran, voiced apprehensions about the high OFS component in IPOs, asserting that it is becoming more of an exit strategy for early investors instead of a means to raise long-term capital. This development could undermine the ethos of public markets, he added.

(With inputs from agencies.)