Sebi plans to reduce IPO-listing gap

Continuing with improvements in the primary market, the Securities and Exchange Board of India (Sebi) proposes to reduce the time period for the closing of an Initial Public Offering (IPO) and the date of listing to three days from six days. A decision to this effect is expected to be finalised at its board meeting scheduled for May 20, investment bankers privy to the matter told FE. A reduction in the timeline will help limit risks related to market volatility that may unfold during the period. Last month, during his meeting with domestic brokers, Sebi chairman UK Sinha had discussed this issue to understand the problems.

The move comes in less than six months of Sebi shortening the listing time for IPO transactions to six from 12 days.The system was introduced with the objective of reducing costs as well as time associated with an IPO.

“It is a welcome move. We are now moving towards international standards where the gap between IPO and listing is as low as one day. These days all the payments are done in electronic format while share allotments are done through demat accounts. Hence there is scope to make the process quicker,” said Prithvi Haldea, chairman of Prime Database.

However, legal experts who spoke with FE said, this move is ahead of time as the current post-issue compliance process takes atleast four to five days to be completed. “The regulator should ease the post-issue compliance process if the gap between IPO and listing is reduced. Currently, investment bankers need approvals from the regulator and stock exchanges at each and every step of compliance which consumes lot of time,” said a securities lawyer.

He added once bids are screened and invalid bids are excluded, the final list of valid bidders needs to be approved by stock exchanges. Further, the basis of allotment needs an approval from the stock exchanges. Once the allotment process is complete, the company will need a final approval from Sebi and stock exchanges for listing.

“There will be hiccups initially however things will stablise eventually.It is not an unilateral decision, Sebi has consulted market participants while taking the decision,” Haldea added. The Sebi chairman has spoken about the concept of quicker listing during several media interactions. In fact Sebi had proposed draft guidelines for electronic-IPOs through a discussion paper that was released in January 2015. According to the paper, quicker listing could boost retail participation and make it easier for companies to raise money.

During the current calendar so far, nine companies have raised close to Rs 6,000 crore via IPOs, Prime Database showed. Further, an additional two dozen companies with valid Sebi approvals are waiting to launch their IPOs, the data showed.