Govt to create ICAI-like institute for IPO pricing

Govt to create ICAI-like institute for IPO pricing


New Delhi: Amid allegations of overpricing of initial public offers, the government is planning to set up an ICAI-like body to make it mandatory for companies to get their shares priced by authorised valuers before hitting the capital markets.

“Rather than imposing direct or indirect conditions (on IPO pricing), we are working on professional valuation. It will be a new law on Valuation Professionals. We are working on it to get a system where valuation is done," Minister of Corporate Affairs Prem Chand Gupta told PTI in an interaction here.

The institution of valuers, being set up by the Ministry of Corporate Affairs, will be a statutory body on the lines of the Institute of Chartered Accountants of India (ICAI) and the entities engaged in valuation work will be required to registered with the proposed body.

According to senior ministry officials, the structure of the proposed institute of valuers will be like that of the Institute of Chartered Accountants or Institute of Company Secretaries of India.

He said at present, there is no set procedure for it and no statutory body, which supervises or regulates this profession. So, he added, the setting up of such institute will make accountability more effective.

At present, such valuations are done by merchant bankers, chartered accountants, company secretaries, cost and work accountants or any other professional possessing such qualification.

There were allegations that various IPOs, like that of Reliance Power, were overpriced due to which investors got swayed and suffered huge losses as the IPO traded lower than the offer price at its close on the opening day.

After the issue of overpricing, the ministry had commissioned a study to ICAI for analysing the methods of pricing.

These valuers will also help in fair valuation of shares or properties in case of mergers and amalgamation or allotment of shares for consideration other than cash.

Gupta said now, the practice of valuation is not regulated and the ministry plans to regulate the system so that investors can take informed decisions.