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Capital market regulator Securities and Exchange Board of India (Sebi) on Tuesday halved the time required between listing and closing of an initial public offering (IPO) to six days.
Currently, the IPO timeline is trade (T)+12 (where T is the last day of the issue), which will be reduced to T+6 for all public issues coming after January 1, 2016. Sebi said the move would help "reduce the costs involved with a public issue of equity shares and convertibles" and "increase the reach of retail investors".
For reducing the timeline, Sebi has made the Application Supported by Blocked Amount (ASBA) route, where money stays in the account of the investor until the allocation takes place, compulsory for retail investors. At present, ASBA is compulsory for the two non-retail categories of an IPO.
As some banks in smaller centres were not equipped to deal with ASBA, Sebi has not yet made the system compulsory for the entire market. The market regulator in a release said almost 99.5 per cent of applications in public issues are now received by way of ASBA and that the six-month window for making ASBA compulsory is to "help intermediaries and banks modify their existing systems and train their staff".
"Removal of ASBA will do away with all the clutter of cheque clearances and save time. Also, the reduction in timeline will reduce the market uncertainty and provide comfort to a lot of investors," said Sanjay Sharma, managing director- equity capital markets at Deutsche Equities.
Added Gesu Kaushal, executive director, Kotak Investment Banking," As companies will be able to list within a week, it will reduce the investor's exposure to market uncertainty. In volatile times like today, market sentiment change a lot in two weeks."
Among other announcements pertaining to the primary market, Sebi has expanded the "fast-track" route for follow on offers and rights issue to a bigger setup of companies by reducing the qualification criteria. Sebi has said the minimum public float for fast-track IPOs stands reduced from Rs 3,000 crore to Rs 1,000 crore. Meanwhile, companies with public shareholding worth at least Rs 250 crore will be able to come out with rights issue under the fast track route, under which the approval process is less stringent allowing companies quick access to the market.
Sebi has also tweaked the offer for sale (OFS) framework. While retaining the T-2 (where T is the day of the OFS) practice for announcing the share sale, Sebi has said the announcement can be made two days from banking days and not trading days. The move will allow an issuer to announce an OFS on Friday and conduct the share sale on Monday as Saturday is a banking day.
Sebi has also asked exchanges to allow retail investors to place bids at "cut off price" as a default option in addition to placing price bids.
The market regulator has also approved the long overdue framework for reclassification of promoters and as non-promoters. Sebi has said an outgoing promoter will have to step down from any key management position in the company within three years. Also, the outgoing promoter will not be allowed to hold more than 10 per cent shares of the company. Sebi has said existing promoters will be allowed to be re-classified as public in case the company becomes professionally managed and does not have any identifiable promoter. For a company to be categorised as "identifiable promoter" company, it shouldn't have a person or a group holding shares of more than one per cent.
Recently, the founder promoters of Infosys Technologies had applied to Sebi to reclassify them as ordinary shareholders.
