Courtesy SEBI, IPO listing in T+6 days starting January 2016

The Indian capital market regulator Securities and Exchange Board of India (SEBI) has approved a slew of measures to facilitate faster listing of initial public offerings (IPOs), reduction in paperwork and greater participation by small investors. Here is a quick recap of the major announcements after today’s meeting:

Mandatory ASBA

Introduced in July 2008, Application Supported by Blocked Amount (ASBA) is a fairly new addition to the IPO process in India. This is an application mechanism which completely eliminates the need for refunds in the cases of partial allotment and no allotment. ASBA allows the investors’ money to remain with the bank till the shares are allotted after the IPO. The funds are transferred after the allotment and to the extent of allotted shares. Initially, QIBs were not allowed to participate in IPOs through ASBA facility; however, with effect from May 2010, investors in all categories were allowed to apply through ASBA.

SEBI has now made it mandatory for all investors to use ASBA feature in IPOs. This essentially means that IPO applications will now be cheque-free. It is important to note that all banks do not offer this facility. A list of Self Certified Syndicate Banks (SCSBs), which is updated regularly, can be found on SEBI website. The number of bank branches with ASBA facility has increased to 95,500 now, a remarkable increase from the 9,800 branches when this facility was introduced.

Compressed listing schedule

Currently, it takes companies 12 days (T+12) after the application process is over to get listed on stock exchanges. These days are on account of sorting paper applications, weeding out ineligible applications, crediting the shares to corresponding demat accounts, issuing refunds to unsuccessful applicants. With the mandatory ASBA, lot of paperwork, especially with refunds, will be reduced. Starting 1 January 2016, IPOs will get listed on sixth day (T+6) after applications are closed.

This compression in listing schedule will help in reducing the costs associated with IPOs, said SEBI Chairman U K Sinha.

Now all applications can be ASBA supported and investors would not suffer any loss of interest, while refund of money would not be a problem

– SEBI Chairman U K Sinha.

More points of submission

The regulator has also allowed registrar, share transfer agents and depository participants to accept application forms in physical as well as online mode. This will enable a greater network for retail investors.

SEBI has also issued a new framework for IPOs of start-ups which is aimed at stopping the exodus of new-age businesses to foreign markets for capital. While these regulations are great for start-ups, small investors will not be able to participate in so called e-IPOs as the minimum investment is set at INR10 lakh.

Also Read: Why SEBI’s e-IPO norms are two steps forward and one step back 

IPO Central will analyse these regulations in great depth in a separate post.

Krishna Bagra

Coming from a family of investors and financial analysts, Krishna learnt wading through regulatory filings pretty early in her career. At IPO Central, Krishna plays twin roles of contributor and head of research desk. She can also be reached at +krishnabagra .

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