SEBI's Five-PAN IPO Rule Risks Coordinated Band Manipulation

The Mint article that reported the proposal also flagged a possible safeguard: require a rising multiple of unique PAN hits for each successive band extension. For the first 10% jump, five unique PAN bids would suffice. For the next jump, the requirement would rise to 25 unique PAN bids, then 125, and so on in a geometric progression. Such a rule would preserve the price-discovery benefit while raising the cost of rigging. A coordinated group of five traders could still trigger the first expansion. They could not, however, push the band further without recruiting a much larger pool of genuine participants. SEBI's consultation window is the right time to push for this adjustment. If the five-trader condition survives without a multiplier, the risk of coordinated band expansion becomes a real factor for IPO participants.

What IPO Participants Should Watch For

Traders and retail investors should scrutinize the pre-open order book for suspicious clusters of bids exactly at the band edge. A concentration of bids from a small number of PAN holders just outside the current limit is a red flag. For large, liquid IPOs, the coordination risk is modest. For the growing number of small-cap and tech listings from pre-profit startups, the risk is material. The next decision point is SEBI's final circular. If the regulator adopts the five-trader trigger without a rising-multiple safeguard, the primary market will have a new vulnerability. Until then, treat the proposed rule as an open invitation to test how far five PAN cards can move a listing price.

For a broader view of how regulatory changes affect stock market analysis, readers can track SEBI's evolving stance. Those participating in IPOs may also want to review the best stock brokers for access to pre-open order data.