“Growing number of unicorns in the startup ecosystem is a testimony of the new age tech companies coming of age in our economy. These companies often follow a unique business model focusing more on rapid growth than immediate profitability,” Tyagi said at an event organised by industry body CII.
During the last 18 months, growth-oriented technology companies have raised a sum of around Rs 15,000 crore through IPOs (Initial Public Offerings). Their filings with Sebi at present show a pipeline of around Rs 30,000 crore, he added.
According to him, recent filings and successful public offerings of such companies is an important landmark in the further evolution of the equity markets.
The first startup to hit the market was food delivery platform Zomato.
Following the successful listing of Zomato, many technology-driven companies filed draft papers with the Securities and Exchange Board of India (Sebi) to float their IPOs. These included Paytm, Policybazzar, Mobikwik and Nykaa.
Tyagi said there has been a recent boom in fund raising through IPOs. The funds raised through IPOs more than doubled in FY21 to around Rs 46,000 crore from around Rs 21,000 crore in the previous financial year.
During the current fiscal, in just five months till August, the amount raised is already close to that raised during the entire previous financial year.
According to Tyagi, funds raised through the IPO route are much more than those raised through either preferential issue or Qualified Institutional Placement (QIP) route.
Based on the applications filed with Sebi, the equity raising through IPOs this year is likely to surpass the highest amount ever raised in any financial year during the last decade, he added.
Further, Sebi chief said that the regulator is planning reforms in IPO price bands.
“If price discovery has to happen through book building, then there should be some band. If the band is just one rupee, then where is the book building. We are examining this,” Tyagi said.
According to him, IPO market price discovery is not as transparent as compared to the secondary market.
“While there are many disclosures, it is difficult for retail investors to study them as the documents are bulky and technical, and then it just becomes a herd mentality to chase IPOs,” he said.
“While Sebi encourages retail participation in initial share sales, we would rather see their participation in secondary markets where there is more information about the company and more liquidity,” Tyagi said.
Further, he said that individual investors’ participation in the stock markets has increased by “leaps and bounds” post the onset of pandemic but still have a long way to go to deepen their participation in capital markets.
In 2019-20, on an average, 4 lakh new demat accounts were opened every month. This tripled to 12 lakh per month in 2020-21 and has further increased to around 26 lakh per month in the current financial year.
Moreover, individuals’ average share in daily cash market turnover increased from 39 per cent in 2019-20 to around 45 per cent in 2020-21.
Holdings of individuals in listed companies has increased from 8.3 per cent at the end of Q1 2019-20 to 9.3 per cent at the end of Q1 2021-22.
“While these trends sound impressive, we still have a long way to go to deepen domestic individual investors’ participation in capital markets,” Tyagi said.
As per global data provider Statista, in 2020, around 55 per cent of adults in the US had their money invested in stock markets, while in India, the securities market penetration is just around 6.5 per cent of the adult population, he added.
Moreover, he urged investors to be cautious over the excess liquidity driving market valuation and high inflation.
Apart from IPOs, Tyagi said that InvITs and REITs have become very popular in the last few years for fund raising and monetisation of infrastructure and real estate assets.
As on August 2021, there are 15 Infrastructure Investment Trusts (InvITs) and 4 Real Estate Investment Trusts (REITs) registered with Sebi.
The recent success of these vehicles can be judged by the sizeable increase in cumulative value of the assets under them, he said.
Put together, the InVIT and REIT assets increased from around Rs 1 lakh crore as on March 2020 to Rs 3.4 lakh crore as on March 2021, and further to Rs 3.52 lakh crore as on August 2021.
Speaking about shareholders activism, Sebi chief said such shareholder activism is good for everyone, mainly for minority investors.
