The Securities and Exchange Board of India (Sebi) wants to make initial public offerings (IPOs) more efficient by reducing the time between the closing of an IPO and the listing of shares.
The capital markets regulator has proposed shortening the current listing period from six days to just three days. This change is expected to benefit both the companies issuing the shares as well as investors. Sebi has invited public comments on the proposal until June 3, 2023.
The reason behind this proposed reduction in timeline is related to Sebi’s introduction of the Unified Payment Interface (UPI) as an additional payment mechanism for retail individual investors. Sebi feels that such systematic improvements in the IPO process validates the reduction of the listing timelines from six days to three.
New Timeline And Benefits
At present, non-institutional investors (NIIs) can submit their applications until 4 PM on the closing day (T-day). Investors other than qualified institutional buyers (QIBs) and NIIs have until 5 pm on the same day to submit their applications. However, there is inconsistency among banks regarding the cut-off time, with some accepting applications as early as 11 AM on the closing day. As such, the new proposal brings a new timeline of 1 pm on the closing day for accepting physical applications. This brings uniformity in the process.
Under the existing system, the application monies are blocked in the applicants’ bank account in real-time for electronic applications. However, additional time may be required by the self-certified syndicate banks (SCSBs) to upload and bid these applications on the stock exchange platform before the bidding closes at 5 pm on the closing day (T-day).
To address this, a convenient timeline of 4 pm on the closing day is proposed for accepting electronic applications.
For syndicate applications processed using UPI through sponsor banks, the bid book of the stock exchange will only include applications with fully-blocked amounts, confirmed by investors’ acceptance/authorisation of UPI mandates in real-time.
At present, investors can accept and/or authorise UPI mandates until 5 pm on the closing day. Therefore, it is necessary to send UPI applications in advance.
So a uniform timeline of 4 pm on the closing day is proposed for accepting UPI applications on both the stock exchange(s) and for facilitating electronic transmission to investors’ mobile applications. This will ensure convenience for investors.
By reduction of timelines, companies will have faster access to the capital raised through IPOs, thus improving the ease of doing business.
What Are Changes In Timeline?
Under the new proposed timeline, scrutiny of applications from third-party investors must be initiated before the closing date. Also, submission of the confirmation of blocked funds by banks to the registrar should be done on the closing date.
On T+1 day, corporate action to lock-in pre-issue capital held in the depository system should be initiated by the registrar. Scrutiny of applications from third-party investors should be completed, and the basis of allotment should be finalised by the registrar.
On T+2 day, all remaining steps should be completed, including publishing the allotment advertisement on the websites of the stock exchange(s), issuer, merchant banker, and registrar.
Finally, on T+3 day, the advertisement regarding allotment should be published in all the newspapers where the opening and closing advertisements of the IPO have appeared earlier. Also, the trading will commence on the same day.