SEBI on Fast Track
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In an endeavour to make the Initial Public Offer (IPO) more efficient, the Securities and Exchange Board of India (SEBI) issued a circular which called for, from May 2010, a reduction in the time gap between the closure of the IPO and listing to 12 days. Hence, from the effective date all companies making an Initial Public Offer (IPO) will have to list their shares within 12 days from the date of subscription closure. Currently companies have 22 days to list their shares after the issue closes.
Earlier on several occasions, SEBI Chairman Mr. C.B. Bhave has indicated that the regulator wants the overall time for a public issue to be cut to 7 days. This is a step in that direction.
According to investment bankers, such a move will make the listing process tough, especially if there are holidays in between. They also expressed that the circular is silent on whether it is "12 days" or "12 working days". A senior banker also commented saying "unless more retail investors use the ASBA (Application Supported by Blocked Amount) route, it will not be possible to shorten the time period between the issue (IPO) closure and listing".
We believe that its€™s a good move overall since:
According to investment bankers, such a move will make the listing process tough, especially if there are holidays in between. They also expressed that the circular is silent on whether it is "12 days" or "12 working days". A senior banker also commented saying "unless more retail investors use the ASBA (Application Supported by Blocked Amount) route, it will not be possible to shorten the time period between the issue (IPO) closure and listing".
We believe that its€™s a good move overall since:
- A shorter timeline will mean reduction in market risk
- It will curtail the speculation emanating from the grey market for IPOs
- Investors will be able to "unlock" their funds faster
- It will benefit companies since they will receive the IPO funds in their account sooner
However, we also feel that market infrastructure will have to be upgraded so that the system can cope with the pressures resulting from the new move.
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