Regulators are intensifying their gaze on the primary market, which has seen some spectacular wealth erosion in listed unicorns. The IPO financing curbs accompany tax treatment of funds raised by startups from any source to move closer to the fair market price. This should check the flow of capital into an ecosystem where traditional valuation methods may be, to put it mildly, inadequate. In the broader IPO market, the regulatory intent is served by squeezing out speculative pockets in the price discovery process. This improves the alignment of the primary and secondary markets, reducing volatility.
Primary market oversight acquires salience for an economy that is positioning itself as a key exporter in the digital economy. India’s public digital infrastructure is expected to widen its pipeline of unicorns. Retail investors can buy into this stream of entrepreneurship at listing, and the regulatory environment should be geared to encourage participation. Domestic investors with lower risk tolerance can help offset the reliance of India’s startup ecosystem on foreign venture capital. India’s rising cult of equity is served by the guardrails that Sebi is erecting around the funding of its innovation. Through safety should come a surge.
