The recently concluded Confederation of Indian Industries (CII) Financing Summit 2025, attended inter-alia, by V Anantha Nageswaran, Chief Economic Advisor (CEA) and SEBI chief Tuhin Kanta Pandey, made headlines because of some plain-speaking by the CEA, who observed: “India’s equity markets have grown impressively, but Initial Public Offerings (IPOs) have increasingly become exit vehicles for early investors, rather than mechanisms for raising long-term capital.”
The CEA was referring to the feverish pace at which companies were debuting on the market; sixty-nine companies had raised nearly Rs.79,000 crore through IPOs, during April-October 2025. Almost all companies had offered their shares to the public at hundreds of times of their face value, even in the case of consistently loss-making companies, who showed some profit in the IPO year to satisfy regulatory requirements. Also, most of the shares on offer in IPOs belonged to promoters, who had acquired them at trifling prices. After offloading their shares to unsuspecting investors, many of the promoters coolly walked away ~ recovering their investments many times over.
This con is on par with the bank loan scam of the last decade, where promoters would shamelessly overvalue their assets, obtain loans from banks, against such overvalued assets, bolstered by fairy-tale business plans ~ and then hot foot with the moolah. Banks would perennially evergreen these loans, leaving behind duped shareholders ~ mostly, the Government, as almost all mulcted banks were Government-owned. Eventually, the bad loans were written off ~ costing the Indian tax-paying public a tidy sum, exceeding Rs 12 lakh crore.
All the while, in parliamentary debates, the Finance Minister insisted that writing off a bad loan was not equal to waiving it off, but there is no record of any recovery, in any of the written-off loans. Here and there, some bank managers were jailed for their malfeasance, but few of the borrowers, or top brass of the duped banks, got their just desserts. The share market regulator, SEBI, is mandated to ‘protect the interests of investors in securities and to promote the development of, and to regulate the securities market…’
For this purpose, the SEBI Act confers it with quasi-legislative, quasi-judicial and quasi-executive powers. Thus, SEBI drafts regulations in its legislative capacity, conducts investigation and enforcement in its executive capacity, and passes legally binding orders in its judicial capacity ~ making it Brahma, Vishnu and Mahesh for the corporate sector. Shenanigans in the share market are, therefore, the direct responsibility of SEBI, and fleecing of investors by promoters, should have drawn the attention of SEBI much before it was pointed out by the CEA. Indian companies earned profits of Rs 7.1 lakh crore in 2024-25, on the back of capital contributed by 10 crore retail investors, as also the capital contributed by the Indian public, through LIC and public sector banks ~ who are the largest investors in most corporates.
At the CII Financing Summit, the SEBI chief stated that his priority was doubling the number of investors to twenty crores in the next three to five years. It would have been perfect, had the SEBI chief, also outlined measures for protecting small investors from sharks of the corporate world. Corporates, including those in the financial sector, have flourished, by maximising the output of employees, through a toxic work culture, which rarely comes out in the open ~ employees are bound by nothing short of an omerta ~ rat on us, and you are out of the corporate world.
Private equity firms, investment banks, consultancy firms, law firms etc. pay their employees the moon but strike a Faustian bargain with young men and women, many of them straight out of college; in lieu of a handsome salary and a workplace with five star amenities, the employee has to sell his body and soul, and almost all waking hours to the company. Also, a number of scams have been perpetrated by companies dealing in finance and money, because financial market and bank regulators, SEBI and RBI respectively, have often failed to prevent systematic gaming of their charges.
In the early 2000s, it was “Crony Capitalism,” a term used to describe the worst characteristics of the politician-businessman nexus of the early 2000s, which saw closed networks of business groups and connected political power centres, indulging in corruption, and nepotism, thereby promoting an ugly form of capitalism, which resulted in numerous bank, and other frauds. Sadly, it is widely perceived, that during the last decade, the ‘crony capitalism’ of the UPA 2 era, has been replaced by an oligarchy; the rich have flourished, while the poor bore the brunt of the Covid pandemic, reverse migration, agricultural crisis, and the collapse of many small and medium businesses.
Presently, corporate profits are at dizzying heights, and billionaires are being minted at record speed. Concomitantly, Government spending on health and education is decreasing in real terms. Another disturbing development is the growing propensity of the Government to lease out public assets to private parties, neglect the peoples’ carriers, railways and buses, and change laws, like the Forest Act, SEZ Act and Coal Mining Rules, to benefit certain parties. Recently, questions have been raised about the fairness of the former top brass of SEBI. It does not help that SEBI sometimes acts in unpredictable ways, like amending its rulebook i.e., Listing Obligations and Disclosure Requirements (LODR) at the drop of a hat ~ often at variance with the Companies Act, 2013 ~ leading to avoidable confusion. Similarly, SEBI has not been able to resolve divergences between LODRs and Issue of Capital and Disclosure Requirements (ICDR) Regulations ~ both authored by itself.
Also, an intermittent turf war with the Ministry of Corporate Affairs (MCA), queers the pitch for investors. Over time, the “principles-based” LODRs have become increasingly prescriptive, and difficult to interpret, due to drafting inadequacies, frequent amendments, patchwork revisions and efforts to regulate every possible aspect of corporate functioning, which results in a heavy compliance burden on companies, excess of paperwork, and taking away focus on issues important to investors. The Justice Sapre Committee, appointed by the Supreme Court, to probe allegations made by Hindenburg Research against the Adani Group, noted:
* There was a need to consider if an abundance of disclosures, mandated by SEBI, overwhelms investors with data, causing them to miss essential information for decision-making.
* SEBI, should prioritize the quality and relevance of information provided rather than just the volume.
* SEBI could better achieve its regulatory goal by more focused enforcement, implying that SEBI should concentrate its efforts on “timely and sharp action in a few large and complex cases” rather than numerous smaller ones. Coming to the CEA’s concerns, for the last many years the Indian stock market, with highly overvalued shares, resembles more a gambling arena where people invest not for regular returns, but for variations in prices. If SEBI wants the stock market to be a regulated marketplace, to enable companies to raise capital, facilitate transparent buying and selling of securities, provide liquidity for investors to trade easily, it has to evolve a better mechanism for determining the price of IPOs, which currently depends on a host of variables that are amenable to manipulation. Secondly, the percentage of shares offered for sale by promoters in an IPO should be strictly regulated, so that promoters do not walk away, leaving unsuspecting investors holding the baby.
However, most investors lose money in the stock market, not solely due to sharp practices by share market bulls and bears, but because of their own greed and impatience. As Paul A Samuelson, the first American to win the Nobel Memorial Prize in Economic Sciences, had said: “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
(The writer is a retired Principal Chief Commissioner of Income-Tax)