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| Sebi to consider reducing IPO allotment time to 5 days |
| Press Trust of India / Hyderabad Aug 21, 2009, 20:03 IST |
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Market regulator Securities and Exchange Board of India (Sebi) today said it will consider reducing the allotment period for initial public offers (IPO) to five days, if the alternate system of payment for public issues, that gained strength in the recent NHPC offering, picks up further.
The alternate system-- Application Supported by Blocked Amount (ASBA)-- allows releasing applicants' money only if the allocation is made.
The main difficulty in reducing the period for allotment of public issues is the fact that a lot of physical applications along with the physical cheques have to be cleared in the system, Sebi Chairman C B Bhave told reporters on the sidelines of the convocation of the Institute of Insurance and Risk Management (IIRM) of IRDA.
If ASBA process becomes more popular, Sebi aims to reduce the IPO allotment period to five days, he said.
"So it is our hope that as the ASBA process becomes more popular, this processing will get reduced and then we will be able to reduce the time line," Bhave said.
At present, it takes around two weeks for allocation of public issues and around three weeks for them to be listed after they close.
Bhave said 1.5 lakh applications were made through the alternative system for NHPC IPO, which closed earlier this month.
The Sebi Chairman said, "So, it is picking up. Of course, banks need to gear up, we need to inform investors more about ASBA process and soon. So these issues are there.
"We will handle them as we go along and hopefully as the ASBA becomes the dominant process, we will be able to reduce the processing time. And therefore, issues will get listed faster than before after the date of closure."
In the traditional system of paying for applications for public issues, investors pay the entire money upfront to the registrar/banker and hence stand to lose returns on the money that is locked until the IPO is allocated.
As per the alternative system, banks block the money in investors' account when they bid for public issue and the money is released on the basis of number of shares being allotted.
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