New Sebi rule treats small & large IPO investors on par

Retail and institutional investors will be treated alike in terms of bidding for shares in public offers from tomorrow, a move also likely to bring down the exorbitant levels of over subscriptions in the primary market.

A new directive from the market regulator Sebi is coming to effect from tomorrow as per which institutional investors will have to pay upfront 100 per cent money in primary issues, just like the retail investors.

Analysts have given mixed responses to how the new norm would impact the IPO subscriptions, at a time when the primary market is seeing a lot of activity.

"While this move may bring down subscription from IPOs, it should not affect recovery of the primary markets. Also, it is a means of encouraging greater accountability and reducing speculation, so it is desirable in the long run," financial research firm Celent senior analyst Anshuman Jaswal said.

"On a theoretical basis, it could impact subscription. But in reality, institutional players do not over trade, they apply only where they want to invest. So unless we have a clutch of issues clubbed together in the same timeframe, in reality it is unlikely to impact IPO subscription," HDFC Securities head (private broking and wealth management) Vinod Sharma said.

Earlier, QIBs were required to put only 10 per cent as margin money in public issues, while retail investors were putting the entire 100 per cent along with the applications.

"This move will provide incentive to the institutional investors to fine-tune their primary market participation and invest their funds more judiciously," Jaswal said.
    
Echoing the view, CNI Research Chairman and Managing Director Kishor P Ostwal said, "This will plug chances of manipulative excess or over subscription in a particular issue."
    
At present, three public issues are open for investors -- Jaypee Infratech, Tara Health Foods and state-run power producer Satluj Jal Vidyut Nigam Ltd.
    
Another move of the regulator coming into effect tomorrow is that the listing time for companies after the completion the initial public offer has been halved to 12 days.
    
Marketmen said the move would help rotate investors' money faster for possible deployment in other issues.
    
Sebi has also decided that reservation for employees in public/rights issues would be available to employees of subsidiaries and material associates of issuer whose financial statements are consolidated with the issuer's.
    
"This could be really helpful in case of IPO of PSU stocks especially, which are of late facing difficulty in getting 100 per cent subscriptions," Ostwal said.