MUMBAI – The Securities and Exchange Board of India (Sebi) has uncovered instances of inflated subscription numbers in initial public offerings (IPOs) by certain merchant bankers, as it aims to counter deceptive practices in the IPO process. Sebi has identified three cases where merchant bankers manipulated application numbers to create the impression of high subscription, according to Chairperson Madhabi Puri Buch. Sebi, which is investigating IPO-related data, is set to take appropriate measures to address such irregularities and may revise policies related to public offers.
The modus operandi involved merchant bankers and a group of investors applying for IPOs in large volumes during the first two days to boost subscription figures. However, these applications were later rejected during scrutiny, leading to a decline in subscription numbers. The initial high numbers are known to attract investors seeking quick gains upon listing.
Sebi has also identified the merchant bankers involved in such malpractices and plans to undertake enforcement actions while reviewing policies to safeguard investor interests. The regulator’s comments come amid a surge in IPOs in recent years, with 161 IPOs between 2021 and 2023 raising approximately INR 2.3 lakh crore, compared to 57 IPOs between 2018 and 2020 that raised INR 70,000 crore, as per official data.
Additionally, Sebi is conducting a thorough analysis of data to weed out mule accounts, which are demat accounts used by unscrupulous entities for trading without leaving a trace of the actual beneficiaries.
Speaking at an event organized by the Association of Investment Bankers in India, Puri Buch highlighted Sebi’s commitment to detecting irregularities in the IPO process. Meanwhile, Sebi whole time member Anant Narayan G disclosed that the regulator is working on regulatory changes to allow alternative investment funds (AIFs) to pledge shares of investee companies and raise funds, potentially benefitting infrastructure firms and expediting capital formation in the economy.
The developments underscore Sebi’s efforts to maintain transparency and ensure investor confidence in India’s capital markets. By closely scrutinizing IPO-related data, Sebi intends to curb deceptive practices that can mislead potential investors and harm market integrity.
