Marketmen see new IPO rules boosting retail participation

Marketmen and exchanges hope that the recent Sebi move to streamline the IPO process will give a leg-up to the struggling primary markets as the measures will significantly reduce investor grievances.

They expect the new IPO norms to help boost retail participation in the market by at least 25 per cent.

Currently, there are about 2 crore retail investors in the market and despite the bull-run in the market last year, there has not been any tangible rise in their numbers.

Leading securities registry services provider Link Intime chief operating officer Haren Modi said keeping in mind the capital markets growth, the new Sebi measures would help increase retail investor base by at least 25 per cent in the next one year alone.

In a major revamp of IPO norms, the Sebi last Tuesday announced making IPO subscriptions cheque-free and also cut down the time taken for listing by half to six days.

The regulator had also said ASBA (application supported by blocked amount), which refers to an application mechanism for subscribing to IPO with the bid amount being blocked in bank accounts rather than that being debited, would be applicable to all kinds of investors.

Hailing the move, the BSE said, "The Sebi measures streamlining the IPO process and listing of startups would definitely encourage more retail participation".

According to the premier bourse, the move would also encourage many brokers who are predominately engaged in the secondary markets, to focus on primary markets as this opens up avenues for new customer acquisitions also.

The largest exchange NSE too hailed the move.

Its chief regulatory officer V Narasimhan said, "Reduction in the IPO time is a very positive move to exploit banking and trading technology for common good. Primary market investors will definitely welcome this move".

Noting that 90 per cent of the total amount in recent IPOs came from ASBA, ICICI Securities' head of capital markets Pranjal Srivastava said making ASBA compulsory is a welcome move, considering its advantages.

"ABSA makes listing simpler and reduces the complexity of issuing cheques and refund of balance money by the issuer," Srivastava said, adding amendments to the IPO norms will "widen the retail investor base apart from reducing costs".

However, he observed that bank branches in rural areas need to understand process of ASBA to make these amendments more meaningful.