SEBI proposes overhaul of IPO, re-listed stock price discovery mechanism

Securities and Exchange Board of India (SEBI) has proposed changes to the price discovery mechanism for IPOs and re-listed shares through the pre-open call auction session. The move aims to improve price discovery and address cases of artificially suppressed listing prices.

In a consultation paper issued on 21 May 2026, SEBI said the existing dummy price band and base price framework for re-listed shares had led to distorted price discovery in certain cases. The regulator noted that some stocks later witnessed repeated upper circuits and surveillance actions due to persistent buying pressure.

SEBI said the review was prompted by representations highlighting that the current dummy price band and base price mechanisms were resulting in artificially suppressed price discovery during the pre-open call auction session. The regulator observed that some re-listed stocks later faced continuous buying pressure and repeated upper circuits in the normal trading session. SEBI also noted that in one instance, nearly 90% of buy orders were rejected for being outside the permitted price bands. Further, for re-listed shares suspended for more than one year, the base price often starts at face value or book value, which in many cases is around Rs 10, leading to unrealistic price discovery.

SEBI has proposed revising the base price mechanism for re-listed shares. For stocks resuming trading after more than six months of suspension, the regulator proposed using the lower book value derived from valuation certificates issued by two independent chartered accountants or valuation agencies.

The regulator also proposed automatic flexing of dummy price bands by 10% when equilibrium prices approach upper or lower operating limits. SEBI further proposed extending the flexing mechanism to SME IPOs.

SEBI said price discovery in the call auction session should be treated as successful only if based on orders from at least five PAN-based unique buyers and sellers. If price discovery fails on the first day for re-listed shares, the call auction process would continue on subsequent trading days until a valid equilibrium price is discovered.

SEBI has invited public comments on the proposals till 11 June 2026.