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| Asba to cover non-retail investors too |
| BS Reporter / Mumbai Nov 19, 2009, 00:14 IST |
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Bhave for changes in primary market issuance rules, corporate bond settlements.
In a move that may lead to faster primary market issuances, Securities and Exchange Board of India Chairman CB Bhave today said the Asba (applications supported by blocked amount) facility would be extended to non-retail investors. He, however, did not say when this would be done.
Experts said if most applications came through Asba, the allotment process would be faster and Sebi would be able to reduce the time between the closure of an issue and listing.
Sebi is considering reducing the initial public offering (IPO) timeline from 20 days to one week. “Once the issue closes, it takes 20 days to list. Delay is the risk the issuer and investor carry. Hence, our aim is to reduce the period to one week,” Bhave said at a securities’ forum.
Sources said the Asba facility for non-retail investors would be optional to begin with. But once institutional investors opted for this facility, the regulator would be able to implement its larger agenda of asking them to make the entire upfront payment along with the application. At present, institutions pay only 10 per cent of the money along with their application in IPOs, leading to over-bidding in many public issues.
“Close to 20- 25 per cent applications in the past three months have come through Asba. So, we want to make it applicable for non-retail investors as well,” said Bhave.
Sebi has been talking about upfront payment by institutions in IPOs for quite some time. But, many foreign institutional investors have said their norms do not permit them to pay money if the allotment is not certain. Asba will give them comfort as money will be debited only when the shares are allotted.
However, this will happen over a period of time. The extension of this facility will help high net worth investors also as many of them invest in IPOs with borrowed money. Asba will help them pay back faster and cut cost.
In its efforts to streamline the primary market issuance process, Bhave said Sebi’s plan was to bring efficiency to the primary market so that costs and risks could be brought down.
“THE primary market issuance process is not as efficient as the secondary market. We need to do something on that,’ he said. Sebi has already reduced the timeline for rights issue from 157 days to 45-60 days and for bonus issues from six months to 60 days.
Sebi is also looking at the asset-liability structure in mutual funds. “Last year, when credit markets went into a squeeze, companies wanted to redeem their investments in mutual funds. We have to look at the entire asset-liability structure. We also looked at the entire composition of mutual funds and efforts are on to make changes there too,” said Bhave.
The regulator felt the cost of transaction in the mutual fund industry had to come down. Recently, Sebi allowed mutual fund units to be bought and sold on stock exchanges. The Association of Mutual Funds in India (Amfi) is also working on a common online platform for buying and redeeming mutual fund units.
“On the Amfi platform, data will be centralised. I don’t think regulation is required. However, if required, we will certainly go ahead and do it,” he said. Sebi has also asked mutual funds to set up an industry forum for corporate governance where they can share their discomfort on various issues related to corporate governance in companies.
Sebi is also looking to streamline settlement of corporate bonds. “We have been struggling with settlement in corporate bonds. We will make settlement of corporate bonds safe and sound and then look forward to repos in corporate bonds,’ said Bhave.
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