SEBI NEW PLAN

Sebi plans 20% upper price band for relisting of stocks
SEBI proposes to introduce a maximum upper limit to shares on the first trading session post demerger, amalgamation, capital reduction, scheme of arrangements and revocation of suspension. The regulator has put up a concept note on this on its website and invited suggestions from the public.The maximum intraday upper limit for such stocks would be 20%, barring for those in the trade-to-trade segment, where the ceiling would be 5%. The market regulator's proposal, however, does not include IPO listings. The move is aimed at checking price rises, beyond a certain limit, on the day of re-listing. Currently, circuit filters on shares are not operational on the first day of the re-listing so as to allow the market to arrive at what they see as a fair value for the share — also called price discovery.The base price for calculating the circuit filters on the day of re-listing will be based on the indicative price or fair value from the merchant banker, who will furnish to the stock exchange the methodology used for arriving at the price.Such controls by the market regulator is against the backdrop of instances where share prices of select companies, which made their debut on the bourses, saw sharp movements. It was suspected that the sharp upmoves were being engineered by a group of investors acting in concert.Merchant bankers and industry observers are not too enthused with the proposal, though they have heaved a sign of relief that it does not extend to IPOs at the moment. But, they are not ruling out such limits for IPOs too in the foreseeable future."When a company chooses to delist, it arrives at a valuation formula on its own and the market has no role to play in it. Hence when the company re-lists on the exchange — the market should be given an opportunity to determine the price," said Prithvi Haldea, managing director, Prime Database, a firm tracking IPOs.Merchant bankers believe imposing of circuit filters on IPOs could reduce the participation of retail investors in the primary market. This is because a large chunk of the retail investments in IPOs are on borrowed money and they look at selling the share on the first day of the listing itself. A circuit filter on the first trading day for IPOs will limit the returns for such investors, who are looking at making some quick profits.
\u003cbr\>"The intention is good, but it distorts the natural price discovery mechanism, which is not good for the market. Rather than such steps, the market regulator should look at introducing short-selling at the earliest