The word risk has taken a backseat and the word greed has come out. Do you think more than anything else, there are going to be checks and balances that need to be done at every level, – be it investor education or brokers who are taking the SME IPOs public?
Ashvin Parekh: It is at all levels. I suppose everybody has to play a role in this. The regulator has started just with a cautionary note. But I suppose it has to go a little further than that and we will come to that a little later. Let us look at the macro situation. There is a FOMO effect over here, clearly, the fear of missing out. There is a huge amount of demand for securities which is chasing the supply at the moment.
I suppose the shift began not only in the case of SMEs, but for the overall market also. We have seen a shift in deposit-taking from banking, from the household, let us say savings, a shift towards capital markets and we are seeing almost Rs 23,000 crore of SIPs in the mutual fund space alone. About 34,000, 35,000 crore every month going into that. So, there is a huge amount of euphoria. Fundamentals have been forgotten somehow or the other.
We are just chasing the small quantity of stock or securities which is available in the market. When it comes to SMEs, however, the story is much more complicated. Here, in addition to the IPO numbers we are getting, the response is so many times more than the subscription. We also getting a sense that basically people are not disclosing very well. Look at the normal IPOs that you normally have for large and midsize entities compared to the SMEs, the extent of disclosure may not be adequate. We need to do something about that.
Do you think there is a fiduciary responsibility of the merchant bankers, exchanges, as well as Sebi as well? They need to strengthen what is needed concerning the regulation for merchant bankers? I was reading a report that Sebi is looking to strengthening the norms for merchant bankers and has given itself powers to cancel the merchant banking license under the new proposed norms. What would be your comment on this issue?
Ashvin Parekh: The regulator does have the fiduciary responsibility. If retail investors suffer on account of whether they had a lot of dispensation for SME IPOs or the intermediation that is the merchant bankers did not play their part properly, finally everything will go back to exchanges and the Sebi, in which case, I believe the norms will have to be far tighter.
We come to the second set of people, the merchant bankers and after that even the use of social media in creating rumours or a certain order of misinformed status about some of these IPOs and some of the responses to these IPOs. From the merchant bankers’ point of view, the dispensations are getting misused, quite clearly. What was created at one point in time to assist small businesses raise capital in the market, is getting misused and there is enough evidence of that. So, right from, like, forensic audit penalty or punishment to the merchant bankers, SEBI pulls up in the main course IPOs. For example, SEBI pulls up the merchant bankers for any error or any wrong disclosure. That is essential over here as well. Third and the most important is the misuse of social media. There are enough regulations that suggest that if any company finds that there is information on that company, which is a rumour, it should become the responsibility of that company to very clearly deny any social media post regarding profitability of that organisation where there is a misuse of information or a rumour.I suppose we will have to get to a point where the regulator, merchant bankers, and the issuers themselves to start with, and thereafter, the media, social media particularly, will have to play a significant place. Otherwise, what was intended to be a good reform because of the misuse, may close down. Also, if the investors suffer very badly, then they will never look at SME IPOs again. I suppose this is a good time really to take care of these things. Otherwise, a good market created would end up having a bad name and get closed.
