Sebi may cut listing time to three days CHANGING TIME

The Securities and Exchange Board of India (Sebi) plans to reduce the time taken for a security to list on an exchange from the date of closure of its initial public offer (IPO) to three days, instead of the earlier envisaged timeline of four days. At present, public issues take six days (termed T+6) to list after closing for subscription. Reducing the listing timeline to T+3 days would, feel experts, help reduce the impact of market volatility.

On January 1, 2016, Sebi had brought down the time taken for listing of shares to six days, from the earlier 12 days. Investors were also allowed to give their application forms to banks, brokers, depository participants and registrar & transfer agents. Earlier, the forms could be sent only through banks and brokers.

The regulator had also made use of Application Supported by Blocked Amount (Asba) compulsory for all categories of investors. In this, an IPO applicant's account doesn't get debited until the shares are allotted. This does away with the need to process refunds if shares are not allotted.

While Asba has played a key role in significantly reducing the time taken to list, reaching T+3 will need a big change in how IPOs are distributed, said experts.

“The primary focus should be on getting the entire banking system into Asba. A large number of branches are still not equipped to handle Asba and this hurts a large number of retail (small) investors. Their physical applications have to then move to a town with an Asba-enabled branch, which eats time and increases inefficiencies. With almost all banks now | Sebi is mulling over reducing listing time of shares to 3 days, from the existing 6 | Migrating to T+3 will need quantum change in how the IPOs are distributed | A large number of bank branches are still not equipped to handle ASBA | ASBA forms are typically collected at one centralised centre in different cities under CBS (core banking solution), such networking is easily possible. This would also help widen the investor base,” said Pranav Haldea, managing director, Prime Database, a primary market tracker.

Asba forms are typically collected at one centre in different cities. There are about 60 such bank branches spread over 50-60 cities and delivering the forms to banks becomes a herculean task for brokers.

“As of now, the process is impacted by prevalent use of physical forms which need to be keyed in manually and verified, the slow response time from certain self-certified syndicate banks (SCSBs) and subsequent regulatory requirements. Further reduction will need a shift towards electronicIPO, a resolution mechanism for delays by SCSBs and streamlining of post issue requirements,” added Munish Aggarwal, director at Equirus Capital.

Two things can be done to reduce the listing timelines, said experts. One, reduce the IPO time from four days to three days — one day for anchor investors and two days for applications from retail, wealthy and institutional investors. Second, do away with the need for Asba and use the OFS (offer for sale) platform for listing.

“Since very large OFS issues, especially of public sector units which are open for only two working days, have been managed smoothly, Sebi should allow IPOs to be done in the same manner as an OFS. The added benefit will be that every applicant will be registered with a broker as a client and, hence, there cannot be a case where an investor who is not registered with a broker approaches one to 'bid' for him. The broker does not know the investor, there is no KYC (know-your-customer check) done, and yet the broker has to accept the form and bid on his behalf. This will save crores of rupees, as no bid forms will have to be prepared and eliminate the need for going to banks for delivering forms for Asba,” said Dara Kalyaniwala, vice-president at PL Capital Markets.