Given the developments in the financial sector, curbing of retail reservation of Initial public offering (IPO) is required. Discuss (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· The Indian as well as the global economies are reeling under the pandemic. However, stock markets, including IPOs, are booming everywhere.
· Since the indices are on a roll, the number and size of IPOs has been unprecedented in India, with 63 companies raising almost Rs 1.2 lakh crore in 2021, up from about Rs 6,000 crore in 2011.
· The scale of money mobilised by a few new age companies, average issue size, retail participation, etc, are also unprecedented.
· Revolutionary ICT changes have created modern organisations with structures and characteristics quite different from the past.
· Asset-light e-commerce and networking entities are clear examples. Their practices and conduct are also quite different from that of traditional companies.
· Coupled with the changes in the structure, conduct and performance of the companies is the gyrating nature of the secondary market.
· IPO pricing does not help the investors; milking the cow with generally nothing left to he calf is the general practice of issuers.
· Given these new developments in the financial markets—the paradigm-shifting new-age companies, their short life-cycles, rapid growth of algorithmic and high frequency trading and the emergence of adventurous investors.
· Regulatory safety-nets and retail quotas, or even just simple nudging, create a false sense of safety, a sort of moral hazard.
