Sebi to revamp initial public offer process To Reduce Cost, Bring Down Time Of IPO Completion From Around 21 To 6 Days Aimed at completely overhauling the current initial public offering (IPO) process, Sebi is working on a proposal that can reduce the time to complete an offer -from opening of bids to public to listing of the shares -in just six days, and also cut costs to go public substantially by eliminating paperwork. At present, it takes about 15-21 days to complete an IPO after it is opened to public. As the time to complete an IPO is reduced under this process, being referred to as eIPO by the regulator, risks for investors will also come down substantially , sources said. At present, the stock exchange and banking infrastructure are used for offers for sale (OFS) through which listed companies raise funds within three days. Initially , eIPO is proposing to complete the process in six days and eventually move to a threeday deadline. The process could also be replicated for debt issuances, sources said. The initial push for moving to a web-based IPO process was mooted in the Budget speech for fiscal 2013 and on November 19, Sebi board gave approval to suitable regulations to be put in place for e IPO to roll. In the current IPO process, investors fill in physical forms and then submit those at dedicated places like broking houses and offices of distributors along with cheques for applied shares.After the bidding closes, share allotment takes another 10 days and then the stock is listed on the bourses. The e-IPO process aims to eliminate most of these cumbersome methods and cut down on the total time drastically. The process will also reduce costs to going public since merchant bankers will not need to print IPO application forms and issue prospectus, among other things. “The shorter time span in which an IPO could be completed will also reduce risks for investors in the offer,“ a source involved in the process said. For example, if the market suddenly tanks after the close of the IPO and it takes about two weeks to list, investors are left with no exit option because they dont have the shares to sell in the market and cut their losses. A similar situation was seen in January 2008 when In dian markets fell dramatically and a large number of investors in Reliance Power IPO had to incur losses. Market veterans feel that in India, in the past two decades, while the secondary market has evolved to move to a near-paperless mode, the primary market has not kept pace and hence needs a major push to evolve to become faster, more cost-effective and less risky.
Posted on: Mon, 29 Dec 2014 11:15:00 +0000
Trending Topics
Recently Viewed Topics
© 2015