New regulations for initial share sale such as shorter listing time for companies and mandatory application for investors through ASBA will come into effect January 1, 2016, UK Sinha, Chairman, Securities and Exchange Board of India (Sebi).
Sinha attributed the better performance of the new issues partly to enabling regulations in the IPO market and said that the improvement in rules will help investors and companies alike. Sebi has also taken up with the Reserve Bank of India (RBI) and the banking lobby Indian Banks Association to train bankers on ASBA to ensure that retail investors’ money is not blocked in IPOs, Sinha said.
“If you look at the data, time taken by Sebi in examining and issuing observations on IPOs has come down by half now. Part of the reason for the delay in the past was that Sebi had proposed safety net for retail investors in the IPOs,” Sinha said while addressing a meeting of the Association of Investment Bankers in India (AIBI).
Sebi had, in June 2015, approved norms for companies to launch their IPOs in an electronic form or ASBA (Applications Supported by Blocked Amount) to reduce the time taken between the share sale and listing of such shares, enhance retail investors’ participation and help reduce costs of doing a public issue.
ASBA is a facility that allows the money to remain blocked in the applicant’s bank account till the shares are allotted, thereby eliminating delays related to refunds of unallocated shares. Currently, companies are required to list their shares on the stock exchanges within 12 days of the last date of the IPO which keeps the funds locked in for a longer time.
Sinha also highlighted that most of the new issues of the past many years have been trading below the issue price and warned that retail investors may not invest again if they lose money in the primary market.
“If retail investors feel they are continuously losing money in the primary market by subscribing to IPOs, they may not invest again. If you look at data prior to 2013, more than two-thirds of the new issues were trading below issue price. Obviously, it had impact on investors. But I am happy that IPOs that have come this year, 56 per cent are trading above the issue price,” Sinha said.
The Sebi chief asked merchant bankers to promote the new platform for start-ups and new age companies, and find new ideas to make listing easier for such companies, besides taking an active role in REITs issuances and municipal bonds.
“I am not disappointed with a single start-up not being listed yet. It is likely to take time as it did in the SME segment. India is the third largest after the US and UK in terms of entrepreneurial activities. I am hopeful that merchant bankers should come together to promote the market (start-up). Market development activities and awareness will take time. If review of regulations needed, Sebi will not hesitate to look at them,” Sinha said.
Sinha said common e-KYC for all financial products (securities, banking, insurance, pensions) would also take more time. The intention of common e-KYC was not to implement something and create disturbance, Sinha observed.
“It is a big issue. The issue is not conceptual but procedural. The procedural part will take some more time as regulators are working on it. A group (members drawn from each regulator) is drawing plans. This will take time,” Sinha added.
| Subscribe To Our Free Newsletter |
