Loss IPOs: Pension fund managers can accept the investment, says the regulator


PFRDA pension regulator said it would not object to pension fund managers (PFMs) participating in new-age IPOs that are constantly making losses, but will ultimately have big gains from valuations posted in the market.

This is allowed as long as the PFMs comply with the latest guidelines framed by the regulator for the investment of pension funds in the initial public offering and / or sale offer (OFS).


“We have enabled our PFMs to invest in all categories of IPOs as long as two conditions are met. One is at a minimum issue size of 500 ₹ and the other is related to the market capitalization of the 200th company on the list of the 200 best stocks listed on NSE or BSE, ”said Supratim Bandyopadhyay, President of PFRDA on Tuesday.

The norms do not prescribe or talk about profitability results or their dividend payments, he explained.

“So, technically, it’s up to public finance managers to decide if they want to participate in the IPO of a loss-making company, but [which is] get great value in the market or not. When I talk to pension fund managers, they are also uncomfortable investing in companies that make losses and gain tremendous market value. But now a window is open for them if they want to take a long-term view, ”he added.

Bandyopadhyay said PFRDA’s IPO guidelines, released on July 27, stipulate that one can invest in shares of such companies through an IPO where the full market capitalization, calculated using the lower IPO issue price range, is greater than the market capitalization. 200th companies on the list of the 200 best shares of individuals listed on BSE or NSE according to the NPS Trust.

If we go beyond this in the current market scenario, it would mean that PFM can only participate in the IPO of those companies that issue a full market capitalization of at least .000 18,000- ₹ 19,000 crore at command posts, he noted.

He also said BusinessLine that so far no case of investing public finances in investing in an IPO has come to the attention of regulators, and these are the early days because the IPO guidelines are only two weeks old.

IPO market

Bandyopadhyay’s remarks on new age IPOs are significant as the Indian IPO market is now recording a torrent of activity, and in the next 6-8 months at least 20 new IPOs (excluding mega LIC IPOs) aimed at raising at least $ 10 billion are in the pipeline . Several of these IPOs are consumer technology and fintechnology (most of which generate losses) which is based on the large adoption of mobile internet in the country. Already this year 21 IPOs have entered the market and mobilized over 75,000 ₹ of capital capital.

Investing in start-up companies

Asked whether the PFRDA will take special initiatives to enable the inflow of money from the pension fund into start-up companies, Bandyopadhyay said the issue is very present, but valuation is a major challenge, especially given that pension investments are placed on a daily basis. market. and the net asset value must be calculated at the end of each business day.

In that context, investing money in fixed start-ups will be a problematic issue for public finance managers, he said, given that only one in a hundred could succeed.


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