Reduction in listing time for IPOs to save Rs 800 cr: Crisil

Market regulator Securities and Exchange Board of India’s (Sebi’s) move to reduce the time between the closure of an issue and its listing will save retail buyers about Rs 800 crore annually on interest paid on the money borrowed for investments, says a study by research and rating agency Crisil.

“Sebi’s recent directive to reduce the time between the closure of an intial public offering (IPO) and its listing to 12 days from 22 will lead to interest savings of approximately Rs 800 crore annually for the retail and high net worth individual (HNI) investors,” the study said.

The move by capital market regulator would help investors save interest cost on the fund borrowed for investing in IPOs and get back their their money faster. “The move will reduce the risk of market volatility in the intermediate period and help rotation of investors’ money faster thereby enhancing the subscription levels in the forthcoming IPOs,” said Head of Crisil Equities Chetan Majithia.

The directive, which will come into effect from May 1, is a step towards realigning the Indian market with the best practices in the developed markets where the listing timeframe is 3 days from the closure of issue.

“Sebi’s move to cut the time frame between IPO closure and listing will benefit the investors participating in the primary market since it will lower the opportunity cost for funds invested in the IPO,” Majithia added.

As per an estimate of Crisil, about Rs 40,000 crore will be raised through IPOs in 2010. The time frame for listing on stock exchanges in developed markets such as the US, UK and Singapore is three days. Even in some of the emerging markets such as Brazil and Hong Kong it is three days.