10-Aug-2023
2 mins read
The Securities and Exchange Board of India, also known as SEBI, introduced pivotal changes to the Initial Public Offerings (IPO) rules that are supposed to greatly impact both investors and issuers. Let us discuss it in detail.
New Listing Timeline: From Six to Three Days
In a notable move, SEBI has cut down the time for listing shares on stock exchanges post the closure of IPOs. Previously, a wait of six days was required, but this has been shortened to just three days. This streamlined approach is intended to boost the ease of conducting business in India’s capital market.
Phased Implementation and Applicability
The revamped listing timeframe, although introduced on August 9, will be a choice for public issues opening on or before September 1. However, it will become compulsory for issues that come to the fore after December 1, ensuring a gradual transition to the new system.
Benefits for Issuers and Investors
SEBI’s latest move seeks to bestow dual advantages:
- For Issuers: The prompt access to capital can potentially fuel quicker business growth and expansion.
- For Investors: An accelerated listing means investors will experience improved liquidity and quicker credits for their investments.
Verification Process Gets Tighter
With the compressed timeline, SEBI ensures that the integrity of the process is not compromised. The Registrar to an Issue will now undertake a rigorous third-party verification, matching the PAN in the demat account to that in the bank account of the applicant. Any discrepancies will render the application invalid for the allotment basis.
Decision Backed by Extensive Consultations
This decision wasn’t taken overnight. SEBI, in its statement, highlighted that the change was a result of intensive consultations with a wide array of stakeholders – from anchor investors and banks to broker-distributors and registrar agents. Moreover, rigorous stress tests were conducted to ensure seamless transition to the new T+3 timeline.
SEBI’s Take on Mutual Fund Regulations
While the spotlight is on the new IPO rules, SEBI’s board meeting in June also touched upon another crucial aspect: the total expense ratio (TER) charged by mutual fund houses. While many expected a restructuring of the TER, SEBI chose to defer the decision. The chairperson, Madhabi Puri Buch, emphasized that a new consultation paper on TER regulations will soon be unveiled, indicating that the previous draft will undergo significant changes.
In Conclusion
SEBI’s move to expedite the IPO listing process reflects the regulator’s proactive approach to making India’s capital markets more dynamic and investor-friendly. While these changes hold promise, their success will ultimately hinge on seamless execution and adaptability among market participants.