The Securities and Exchange Board of India (SEBI) has introduced a proposed framework aimed at enhancing price discovery in initial public offerings (IPOs) and re-listed stocks. This framework includes modifications to base price calculations, automatic adjustments to dummy price bands, and more stringent requirements for successful price discovery during the pre-open call auction session.
For stocks that are re-listed within six months of suspension, SEBI suggests using the most recent closing price within the past six months as the base price. If there is no recent trading price, the lower book value, certified by two independent chartered accountants or valuation agencies, may be utilized. For stocks that have been suspended for more than six months, exchanges will adopt the lower valuation certified by two independent valuers as the base price.
Additionally, SEBI intends to retain the existing dummy price band mechanism for IPOs, SME IPOs, and re-listed stocks, but with a provision for immediate adjustments of up to 10 percent to the price bands when equilibrium prices approach either the upper or lower limits. Exchanges will also continue to expand the price bands during the random closure period from 9:35 AM to 9:45 AM. Price bands can be widened when there are orders on only one side of the market, contingent upon verifying orders from a minimum of five unique investors based on PAN.
The regulator has stated that a call auction session will only be considered successful if it includes participation from at least five unique buyers and five unique sellers. Should price discovery not succeed on the first day for a re-listed stock or a stock undergoing corporate restructuring, the call auction session will persist on subsequent trading days until a price is established.
This decision follows concerns that the current mechanism has been causing “artificially suppressed price discovery.” SEBI noted that the existing dummy price band and base price mechanism have led to consistent buying pressure post-listing, resulting in repeated upper circuit hits. According to SEBI’s consultation paper, in one instance, 90 percent of buy orders during the call auction for a re-listed stock were rejected because they fell outside the established price bands.
Under the current regulations, re-listed stocks that have been suspended for over a year typically begin trading with a base price linked to their face value or book value, which often starts at ₹10. SEBI is inviting public feedback on these proposals until June 11, particularly regarding whether the revised dummy price band mechanism should also extend to SME IPOs.
Published on May 21, 2026.
