Sebi reduces public issue timeline to 12 days

The Securities and Exchange Board of India (Sebi) has proposed to reduce the time between the closure of a public issue and its listing to 12 days from the current threshold of 22 days. This will be applicable to public issues will op[en after May 1 2010. It takes bout 3 weeks now.

This way, small time players who want to make some quick buck for listing gains can get better ROI given this reduction.

With ASBA already in place, investing IPO has become that much for friendly for retail investors.

What more can come in IPO markets ??.

Investors get alternate payment option for IPOs

In a proposal made by SEBI, retail investors who are ready to apply at the cut-off price in a public issue on the condition that they will not revise their bids later on, will be eligible to use the proposed Applications Supported by Blocked Amount (ASBA) mode of payment. Under ASBA, the application money will not leave the investor’s account till the basis of allotment has been finalised.

SEBI has worked out the modalities for the proposed system and has invited public comments for the same. June 6 has been fixed as the last day for submitting comments or suggestions. However, ASBA method will be only an optional one and would co-exist with the current system of investors using cheque as a payment instrument.

According to the proposed process, retail investors would have to submit bids at the cutoff price through self-certified syndicate banks (SCSBs) in which they have their accounts. Thereafter, the banks would accept the applications, block the funds to the extent of bid payment amount, upload the details in the electronic bidding system of BSE or NSE, unblock the money once the basis of allotment is finalised and transfer the amount for allotted shares, to the issuer. At the same time, if sufficient balance for blocking the amount is not available in the applicant’s account, the application shall be rejected.

Banks that wish to be recognised as SCSB must hold a valid registration certificate as a banker to issue under the Sebi (Bankers to an Issue) Regulations, 1994. Banks also need to undertake mock trial run of its systems with BSE or NSE and few registrars and in order to check that the adequate systems and infrastructure are in place at its controlling branch and the designated branches.

Such banks must also have an arrangement with BSE or NSE, which would allow them access to the web-enabled interface of BSE or NSE for uploading the bid/application data in their electronic bidding system.

Sebi has directed the stock exchanges to make available a web-enabled access to their electronic bidding system to the SCSB and the designated branches for uploading of the bid/application data.

SCSBs, which wish to enable online application through ASBA, will have to use its own net banking facility and will not be allowed to compel the investor to apply through brokerage entities that are its subsidiaries or associates or with whom it might have some arrangements.

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