Display risk factors prominently in IPO adverts: Sebi to investment bankers

Experts believe Sebi's diktak will help investors under the risk better

Market regulator Sebi wants IPO advertisements to display risk factors prominently. Also, Sebi wants the acquisition cost of all transactions in three years prior to the listing to be a part of the risk factors.

"The risk to investors shall include weighted average cost of acquisition of all shares transacted in last three years and one year, from the date of red herring prospectus," Sebi has said in a communication to investment banking industry body AIBI.

"The portion pertaining to 'risk to investors' shall constituted at least 33% of the price band advertisement space," Sebi has further said.

Experts said the "risk to investors" portion of IPO advertisements accounts for 10-15 per cent of the space.

They said Sebi's diktak will help investors under the risk better.

Existing shareholders have made multifold gains by selling their stakes in IPOs this year. Many have called this transfer of wealth from retail investors to sophisticated investors.

Sebi has prescribed a format where the acquisition cost will be compared to the price investors will be paying in the IPO.