SEBI has now allowed companies going public to announce the price band two days before the issue opens. The intention of SEBI was indeed very creditable and must have been with lot of deliberations. It however is also likely to lead to lot of confusion. Issues open around the beginning of the week typically on Monday and Tuesdays and close at the end of the week. Road shows for the same open three/four days in advance so that when an issue is opening on Monday the road show would be on Wednesday onwards. Analysts from the media houses and broking houses are typically headquartered in Mumbai and prepare reports and discussion papers on the issue based on their discussions at the road show. When there is no price band disclosed it is akin to attending a wedding reception without the bride and the bridegroom.

Discussion at a road show centres around three points. The present business of the company and its prospects and what is the sector all about. Secondly it discusses the future prospects and profitability. The third element is about valuation and whether investment is warranted or not and at a given price. We all know that everything is good or bad at a price. No company need be good at any or every price and similarly no company is bad at every price. Any discussion without a price is like shooting arrows in the air. Any assumptions made would be meaningless and the company would get no idea about the feedback that the price band has generated. The biggest casualty of this would be that the price band being decided and announced so late would give no opportunity to discuss price, and articles which appear in the press on public offerings may not carry the required comments for investors to make meaningful judgement on their investments.

There is an issue opening next week of Adani Power on 28th July and they are having their road show today in Mumbai. I would be discussing some of the points on this issue from tomorrow onwards. They have yet to announce the price band and this could be an interesting case to talk about.

Please log in tomorrow to read reactions on this issue, probably the first mega issue of IPO SEASON 2.