Sebi to discuss market reforms today

Cut in listing period, full payment from institutional investors on allotment on agenda.

The next round of primary market reforms is on the radar of the Securities and Exchange Board of India’s (Sebi’s) advisory committee.

The committee is meeting today to discuss issues related to shortening the period between the closure of an issue and listing and ensuring that institutional investors make full payment soon after they are allotted shares.

Sebi has already introduced the concept of anchor investors for initial public offers (IPOs). These investors can be allotted shares before the issue opens. Anchor investors have to pay 25 per cent money before the issue and the rest within two days of the allotment of shares.

Qualified institutional investors can apply by paying just 10 per cent of the application money. Sebi has been saying that this practice is not healthy as it prevents price discovery. This is because retail and high networth individual investors, unlike institutional investors, have to make full payment with the application. One of the proposals expected to be discussed in the meeting is to have a norm mandating that all institutional investors make full payment soon after the issue closes. For this purpose, the allotment to institutional investors has to be completed in two-three days from the closure of the issue. Since the number of such institutional investors is less, allotment to them can be easily completed in two-three days, say officials. The original proposal was to ask them to make full payment along with the application. The committee is expected to discuss this proposal too.

It is learnt that Sebi also wants to fast-track the process of closure of issues and listings. At present, a lot of time is spent in compiling applications and crediting money for retail applications from distant areas. To hasten this process, Sebi has allowed banks to offer applications supported by blocked accounts (ASBA) facilities. Under this, the bank debits money from the account of the applicant only after allotment of shares.

The facility, however, has not picked up as banks find service not very remunerative. This issue would also be discussed tomorrow.