SEBI soon coming up with e-IPO norms

Investors will soon find it easy to apply for Initial Public Offers (IPOs) as capital market regulator, Securities and Exchange Board of India (SEBI) is coming up with norms on electronic form of IPOs. The e-IPOs will allow investors to subscribe to issues online without filling application forms and standing in queues, according to an ET report.

Moreover, the e-IPO system will reduce the total IPO investing process for investors to six days from the existing 12 days.

At present, there are various ways of submitting an application form for a public issue including applying with a cheque. This makes it difficult to reduce the post issue timelines from the 12 days from issue closure to listing and trading of shares.

The challenge with the current system is the time taken for clearing cheques of the retail investors. “The proposed e-IPO system is likely to do away with cheques and provide payments through NPCI (National Payments Corporation of India), brokers besides the current ASBA (Application Support Blocked Amount) mechanism…," Haresh Hinduja, head-primary market, Link Intime, told the financial daily.

If an investor makes an application through the ASBA route, the applicant's bank account doesn't get debited until shares are allotted to him. But, the system still has some challenges.

In 2008, the market regulator had introduced the ASBA mechanism, which is mandatory for institutional and rich investors, while optional for retail investors. At present, 70% of the applications by retail investors are done through cheques.

In the current IPO process, implementing ASBA across the country is a challenge. For instance, if investors send ASBA forms of multiple banks, brokers find it tedious to verify all the forms with the banks and clear them within the IPO 12-day period.

"The proposed e-IPO mechanism has allowed more entities such as depository participants and registrar and transfer agents to accept ASBA forms, besides replicating the OFS (offer for sale) model. The client will make bid application and the clearing corporation will block brokers funds. Thus the whole settlement will be through the secondary market route," CEO of Kotak Securities Kamlesh Rao told ET.

SEBI is also planning to reduce the size of the abridged prospectus further and make it available electronically.

(Image: Indiatimes)