Changes in IPO refunds

The Economic Times news paper reported today that one may no longer have to wait for weeks for a refund if one fails to get an allotment in an initial public offer (IPO).

The Primary Markets Advisory Committee (PMAC) of the market regulator Sebi is actively considering introducing a value-paid instrument, that would be backed by an irrevocable lien. In simple terms it means that banks would block the full application amount — the total value of the shares applied for — in the investor’s account till the shares are allotted.

This blocked amount would continue to remain in the client’s account but would not be available for withdrawal or cheque payment. It would, therefore, continue to earn interest in the intervening period. On receipt of advisory from the registrar about the allotment of shares, the bank would release the amount equal to the cost of total number of shares the client has been allotted. This move would apply to both physical and electronic applications.

The proposed move would come as a relief to investors who face liquidity crunch as their investment remains locked in till companies refund the amount. In some cases, this could take a month, making it difficult for the small investor to invest in other issues. The new norm is also aimed at making the IPO process more efficient and transparent.

The move is aimed at cleaning up the IPO process and making it investor-friendly, a source close to the development said. The proposal after getting cleared by the PMAC will go to the Sebi board for consideration.

The proposal will remove a layer that led to blocking of retail investors’ funds. At present, it takes 15-50 days for the investor to get his refund.

Besides streamlining the financial aspect, the application form would be shortened to a single page of A-4 size and the IPO process till listing shrunk to 7-8 days. At present, the process from the day IPO opens for subscription to, till it lists on the stock exchanges takes 20-22 days.

The proposed move is to help investors who face liquidity crunch. It is also aimed at making the IPO process more efficient The measure will remove a layer that delays refunds. At present, it takes 15-50 days for retail investors to get refund After PMAC nod, it will go to the Sebi board for consideration

Bharti AXA gets SEBI nod for MF foray

Bharti AXA Investment Managers has received regulatory approval from SEBI to start its mutual fund business in India. The company is a joint venture between Bharti Ventures, AXA Investment Managers (AXA IM) and AXA Asia Pacific Holdings.

AXA IM is one of the largest Europe-based asset managers with $830 billion in assets under management as of end December 2007. Bharti Ventures is part of Bharti Group, with interests in telecom, agri-business, insurance and retail.

Now one will see a flurry of schemes opening up from this company and there will be a flood of NFOs coming up.