Norms on IPO pricing, end use in the works
The companies, with no set guidelines to follow, on their own perception of demand for shares set the value limits. It happens many times that the money raised by companies is being used for different purposed other than for the stated purpose therefore Sebi, the ministry of corporate affairs and capital market regulator, will soon bring rules for fixing the price-band for companies going public and they should disclose the constraints on which the price-band is fixed, including EPS, price earning multiple and return on net-worth. Sebi does not play any role in price fixation and with the merchant banker's consultation issuer has to decide the price. Salman Khurshid, ministry of corporate affairs mentioned that the proposed regulatory change will also ensure that funds raised through IPO are not diverted and the track of the money raised will be kept by the ministry's early warning system.
The system has the involvement of Sebi and uses the data available through the ministry's own e-governance network will very soon be extended to with the purpose of covering the whole corporate sector. This will help government to track suspected corporate frauds. The main purpose behind all this exercise is to decrease the fraud cases and to control the suspicious corporate activities.
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