IPOs: Sebi mulls separate days for retail, inst investors

In what could be a major overhaul of the way public offers are conducted, market regulator Sebi is mulling over a possible demarcation of days to be given to retail and institutional investors for submitting their bids.

As part of efforts to attract more retail investors to the stock market, Sebi is considering a proposal wherein the institutional investors would be first asked to submit their bids, possibly in the first two days, and then the remaining two days would be open only for retail investors, provided the IPO is open for four days.

The move is being considered because retail investors have been traditionally following the cues from the demand generated among the large institutional investors and put in their bids on the last day, but in the recent IPOs the institutional investors have also been seen waiting till the last moment.

This has led to a large chunk of retail investors missing on the opportunity to invest in the IPOs where institutional investors have come in during the last hours, a senior official at a leading merchant bank said.

The banker said such problems have been aggravated in the recent months as investors have not been able to reap any big returns and have in fact lost money in some IPOs, thus making them hesitant to put in their bids in the initial days.

Sebi believes, the banker noted, that the response has been even more worrisome from retail investors and while most of the recent IPOs have managed to get handsome bids from institutional investors, that is not the case for small retail investors.

The proposal of earmarking separate days -- first few for institutional and last few for the retail investors -- is currently being discussed by the Sebi's Primary Market Advisory Committee as part of its efforts to revive retail investors' interest in the public offers.

Among other steps, the Committee is also considering making the IPOs a simpler investment process. Besides regulation and development of the primary market, this committee also advises Sebi on changes required to make the systems and procedures simpler and transparent.

The primary market used to be retail investors' favourite investment avenue and an entry point for many of them till a few years ago, but their interest has been dwindling of late.

This was reflected even in the recent offers from some public-sector firms, which have traditionally enjoyed a sound and safe investment image among public investors.

Sources said the government has also been asking Sebi to revive public investors' interest in primary market.