SEBI had received representations that the current mechanism was leading to “artificially suppressed price discovery”

The Securities and Exchange Board of India (SEBI) has proposed a new framework for price discovery in IPOs and re-listed stocks, including changes to base price calculations, automatic widening of dummy price bands and stricter conditions for successful price discovery during the pre-open call auction session.

SEBI has proposed using the latest closing price within the previous six months as the base price for re-listed shares if trading resumes within six months of suspension. If no recent traded price is available, then the lower book value certified by two independent chartered accountants or valuation agencies can be used.

For stocks returning after more than six months of suspension, exchanges will directly use the lower valuation certified by two independent valuers as the base price.

Price band mechanism

SEBI has also proposed continuing the existing dummy price band mechanism for IPOs, SME IPOs and re-listed stocks, but with automatic and immediate flexing of bands by 10 per cent when equilibrium prices near the upper or lower range.

Exchanges will also continue widening bands during the random closure period between 9:35 am and 9:45 am. They can widen price bands when orders exist only on one side of the market, but only after validating orders from at least five PAN-based unique investors.

The regulator has proposed that a call auction session will qualify as successful only if at least five unique buyers and five unique sellers participate in price discovery.

If price discovery fails on the first day for a re-listed stock or a stock undergoing corporate restructuring, the call auction session will continue on subsequent trading days until a price is discovered.

SEBI had received representations that the current mechanism was leading to “artificially suppressed price discovery”. The existing dummy price band and base price mechanism were creating persistent buying pressure after listing, leading to repeated upper circuits.

“In one of the instances, it was observed that during the Call Auction Session of the re-listed scrip, 90 per cent of the buy orders were rejected due to being outside the price bands,” SEBI said in the consultation paper.

Existing norms

At present, re-listed stocks suspended for over a year generally begin trading with a base price linked to face value or book value, which SEBI noted “in most of the cases” starts at ₹10.

The regulator has sought public comments on the proposals till June 11, including whether the revised dummy price band mechanism should also apply to SME IPOs.

Published on May 21, 2026